Alicon Castalloy Ltd Management Discussions.


We are amidst unprecedented times. The COVID-19 pandemic has spread across the world and has led to enormous human suffering and slammed the brakes on commercial activity. With lockdowns spread across countries accounting for over 50% of the world Gross Domestic Product (GDP), it has led to disruptions and dislocations on a scale never imagined. The spectre of empty high streets and shuttered factories and markets was a scenario hitherto unseen.

As we write this, economies across the globe are tentatively emerging from lockdowns. The exit path from lockdowns is likely to be precarious with uneasy consumers, tricky health protocols and an irregular business rhythm.

Governments across the world have unleashed massive fiscal measures to protect economic activity from the impact of the virus apart from targeted health services to alleviate the sufferings of the infected and protect the potentially exposed. Central banks across the world have also initiated multiple monetary and regulatory measures.

In India too, the overall package announced amounted to Rs 20 Lacs crore which is approximately equivalent to 10% of Indian GDP, under Self-Reliant India Movement to revive the countrys battered economy. A few highlights of the package include:

• Rs 1.7 Lacs crore relief package to alleviate hardships faced by the vulnerable section of the society

• Collateral-free loans and concessional credit to farmers and street vendors

• Enhancement of systemic liquidity by the Reserve Bank of India (RBI)

• Rs 15,000 crore for Emergency Health Response Package

• Relaxation in Statutory and Compliance matters

• 100% credit guarantee scheme for aggregate Rs 3 Lacs crore of emergency credit lines by banks and NBFCs to their MSME borrowers and

• Disallowing global tenders up to Rs 200 crore to improve the competitive position of Indian MSMEs vs global players

A brief summary of the economic environment in FY 2019-20 (FY 2020) and the emerging trends in the wake of COVID-19 pandemic are discussed below.

The world economy delivered one of the lowest gross domestic product (GDP) growth in FY 2019-20 in the backdrop of muted manufacturing activity and the onset of COVID-19 pandemic. As per the International Monetary Fund (IMF), it grew by 2.9% in CY 2019, much lower than 3.6% growth it recorded in CY 2018. With the worlds restrictive measures ceasing manufacturing plants, disrupting supply chains, and bringing many global businesses to a standstill. The IMF projects world economic output to decline sharply by 3% in CY 2020. It forecasts healthy growth of 5.8% in CY 2021 provided pandemic is successfully brought under control and production and trade activities are allowed to resume.

The Indian economy was expected to experience a slowdown in growth in FY 2020 given the significant moderation in activity. In an effort to provide a boost for the economy, the Government of India took several steps - including a substantial direct tax benefit to the corporate sector to boost investment. However, even without the terrible effects of the pandemic, the latest estimates of GDP and GVA growth released by the CSO on May 29, 2020 reflected significant moderation in growth in FY 2020 with the GDP growth for April to June 2019 being 5.2%, slowing down further to 4.4% in July to September 2019, 4.1% in October to December 2019 and plummeting to a 3.1% growth in January to March 2020. The GDP growth for FY 2020 was 4.2%, the lowest in 11 years.

Given the uncertain environment, it is too early to hazard the trajectory of the GDP in India at this stage.

We expect a challenging FY 2020-21 given the unprecedented economic crisis that the COVID-19 pandemic has caused globally. It remains to be seen if the steps taken to reopen the shuttered economy do translate into kickstarting the economy without risking a major spike in infections.


The global casting production increased by 2.6% in CY 2019 to reach 112.7 million metric tonnes as per 53rd World Casting Census published by Modern Castings USA in December 2019. China, India and the US continued to dominate the market. India and China together account for over 55% of total global production, with India contributing 12.24% while China contributing 43.7%. In CY 2019, China witnessed a marginal production decline of 0.1%, while India delivered a robust growth of 11% in CY 2019.


The transportation sector is one of the primary industries for the growth of the aluminium die casting market. Within the transportation segment, lightweight vehicles are considered to be the key driver for growth in the forthcoming years. Automakers in different countries are focussing on lightweight vehicles. For instance, top OEMs in India, such as Tata Motors, Mahindra & Mahindra, Eicher Motors, and Ashok Leyland, are exploring possibilities to develop energy efficient vehicles by using aluminium.

(Source: aluminum-die-casting-market)

• High availability of technically skilled engineers • High dependence on Automobile segment • Emerging opportunities in automobile sector in the wake of E-mobility solutions • Uncertainty over the slowdown in the wake of COVID-19
• Low cost of labour and manufacturing • High energy consumption • Unfavourable fluctuation in raw material prices
• Strong industrial base with good availability of alloys • Intense industry competition • Rising opportunities in non-auto industries
• Strong technical know-how in producing high quality castings • Labour shortages • Favourable environment with Governments thrust on Make in India
• Structural growth drivers in both domestic as well as international markets • Increasing use of data-analytics, simulation and robotics

Alicon is a major supplier of aluminium castings to the automobile sector. While it continues to diversify its product suite in the non-automobile sector, the automobile sector remains its mainstay. Alicon hopes to capitalise on the likely rationalisation of global supply chains which automobile manufacturers may embark upon to reduce their dependency on single source of supplies in the wake of COVID-19 pandemic.


The Alicon Group (the Company) – a consortium of Alicon Castalloy, Atlas Castalloy, Illichmann Castalloy & Silicon Meadows, is one of the largest integrated aluminium casting manufacturers. The Company has created a distinctive identity for itself through seamless integration of these companies. Leveraging Indian cost efficiency of Alicon Castalloy, and European engineering skills of Illichmann Castalloy, the Company has evolved as a one-stop shop for all engineering solutions of aluminium alloy castings. Backed by these strengths, it provides high-quality products and innovation-driven solutions to industries such as automobile, infrastructure, aerospace, medical, energy, agriculture and defence.

The Company has established state-of-the-art plants at:

Shikrapur in Pune, Maharashtra

Chinchwad in Pune, Maharashtra

Binola in Gurugram, Haryana

The operations of the Company are supported by state-of-the-art technology centre developed in Slovakia. Its advanced tool rooms, laboratories for quality and testing purposes and a comprehensive machine shop including a sub-assembly facility, has played a crucial role in providing the Company with a technological edge over the competition. The Companys foundries are located at strategic locations near its key markets, enabling it to achieve superior speed-to-market and cost-efficiency.

Backed by a strong track record, innovating yet cost-effective solutions, efficient execution capabilities, and world-class services, the Company has nurtured a strong relationship with marquee customers across the globe. These include domestic as well as international two and four-wheeler Original Equipment Manufacturers (OEMs), and several tier-I non-auto companies.

Many of the customers partner with the Company from the prototype stage. The Companys Eight-Step process, developed and perfected in-house, plays a key role in gaining the trust of these customers. The process optimises the performance of each component through continuous design and manufacturing enchantments with a consequent reduction in rejection rates and ensuring strict adherence to delivery timelines.


FY 2019-20 proved to be a challenging year for the industry on account of a sharp contraction in the automotive industry, its mainstay customer. Amidst this one-of-a-kind challenging environment, the Company is able to achieve Revenue of Rs 957.19 crore in FY 2019-20 as against Rs 1,188.89 crore in FY 2018-19, implying de-growth of 19.5%.

The Companys prudent decision of differing expansion plans and instead focussing on higher utilisation of existing capacities yielded encouraging results. Its focus on controlling operating costs and rationalisation of inventory levels improved the Companys working capital efficiency and achieved superior profitability margins.

Connectivity, Autonomous, Sharing and Electrification (CASE) is bringing about transformative changes to the automobile industry globally. In this backdrop, while embracing newer technology and exploring new avenues of growth, the Company is also strategically focussing on developing technology-agnostic parts to achieve sustainable growth.

The Company – committed to providing innovative, high performance and cost-effective solutions, launched a range of products in two-wheelers, three-wheelers, and commercial vehicles categories and received an encouraging response from the customers.


The trend of declining domestic automobile sales witnessed since the second half of FY 2018-19 continued in FY 2020 with tepid demand, and liquidity constraints faced by automobile financiers. The decline in demand was further accentuated due to the muted wholesale demand from automobile manufacturers as they set about clearing inventory of vehicles in the retail ecosystem. This was in order to transit their production of vehicles which complied with BS-VI emission norms which were scheduled to be implemented with effect from April 01, 2020.

Our overseas business also witnessed a de-growth on account of muted global demand due to escalating trade tariffs, customers adopting to the technological transformations in the automobile industry and the impact of COVID-19 towards the end of the fiscal year disrupting manufacturing activities and supply chains.

At Alicon, our aim has always been towards making ourselves ‘FUTURE-READY by consciously engaging with all our employees and adopting the 3R policy, which is Reflection, Resilience and Reimagined thinking as a way of life. Our 3R policy has yielded many positive leads and results, which are as under:

1. Built a Groupwide Cross-Functional Foundry Team which is working on multiple strategic projects by leveraging on technology.

2. Created a Division of Business Excellence for continuous process and operational excellence to drive savings in Direct, Indirect and Administrative costs.

3. Focus towards Cash conservation and ensuring accretive Cash Flows through capex rationalisation and wastage elimination, thereby enabling us to be Lean and Agile in our business functions.

4. Formed an Ecosystem consisting of Apex and Execution Teams which has set up SOPs through manuals and training to ensure Safety and Health of all employees and implementation of procedures and protocols at all plants and facilities.

Alicon took immediate steps to handle the lockdown imposed in the wake of COVID-19. Keeping employee safety, customer and vendor connect as the main focus we took the following steps:

1. Created a Guardian system where each designated Guardian act as a caretaker for 15 to 20 associates during the lockdown period by ensuring their basic needs namely ensuring availability of essentials and supporting them in case of medical exigencies, thereby strengthening a bond of trust.

2. Strengthened customer connect – our teams have constantly been in touch with customers and worked with them on many RFQs and are geared up to hit the ground running as the situation normalises.

3. Extended support to our Tier II suppliers in multiple ways to enable them to withstand the impact.

As we embark on a difficult journey in FY 2020-21, we believe that our long-term strategy to reach a milestone of multiplying our current scale of operations will help us surmount this short-term challenge.

While all our units are currently operating at lower capacity, the Company is undertaking utmost precaution and deploying the highest safety standards as advised by the Government Authorities across all its manufacturing units. With regard to international operations, the manufacturing plant in Slovakia continues to be fully operational albeit with adherence to elevated safety standards and precautions.

During FY 2019-20, we have received large prestigious orders with leading Global OEMs and Tier 1 Suppliers such as Jaguar Land Rover, Daimler, Samsung, SDI & MAHLE. The order received for supply of aluminium chassis, heavy truck engine parts, e-mobility parts and cooling modules of heavy engine trucks. These long duration contracts are valued at Rs 810 crore in aggregate over a period of 5 years with supplies commencing in stages between FY 2020-21. These order wins demonstrate Alicons readiness to adapt to emerging technologies and remain a preferred supplier to these major global OEMs and Tier 1 suppliers. This will result in steady and consistent volumes in the future. These new contracts exemplify Alicons technological excellence and innovation capabilities in the Aluminium castings space. With a rich legacy of over 50 years, Alicon is a proven leader in the low-pressure die-casting and gravity die-casting technology in the domestic market and, through its European Subsidiary, is steadily enhancing its global presence with industry leading OEMs.


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.


(In Rs Crore)

Particulars FY 2019 -20 FY 2018-19
Total Income (Net of taxes) 959.99 1,192.05
Cost of Goods Sold 487.66 599.50
Manpower Costs 143.03 165.04
Other Expenses 220.60 277.90
Earnings before Interest,
Depreciation,Tax and 108.68 149.61
Amortisation (EBITDA)
Depreciation and Amortisation Expense 44.03 38.09
Finance Costs 39.34 35.34
Profit Before Tax (PBT) 25.32 76.19
Profit AfterTax (PAT) 17.03 52.95
Earnings Per Share (Basic) (Rs) 12.41 39.31


Particulars Unit of Measurement FY 2020 FY 2019
Turnover Ratio (in times) No. of Times 4.60 5.01
Interest Coverage Ratio (in times) No. of Times 2.76 4.23
Current Ratio No. of Times 1.14 1.06
Debt Equity Ratio No. of Times 1.13 1.01
Operating Profit Margin Percentage (%) 11.04 12.06
Net Profit Margin Percentage (%) 2.6 6.4
Return on Net Worth Percentage (%) 5.4 17.2


The Company believes and recognises that its employees are important resource in its growth and to give competitive advantage in the present business scenario. At Alicon, we are always constantly taking steps to be future-ready and accelerate the journey in the next normal scenario. The employees are the crucial differentiator and partner in the above journey. The Company takes pride in the commitment, competence and dedication shown by its employees towards this journey. Grooming and developing leaders for the future has been significant cornerstone of our human resource initiatives. 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.

The next normal scenario requires every employee to constantly apply and contribute through the 3R framework which is Reflection, Resilience and Reimagined thinking as a way of life. Supported by the Alicon Cultural Pillars of Agility, Innovate and Passion, our employees effectively used this 3R Mantra during the downturn and the lockdown. These workings are led to internal rewiring of the Organisation and sharp focus on efficiency and cost optimisation, all of which are championed by our employees.

At Alicon, the health and safety of employees and their around community is given utmost importance and towards this end, we have taken the following steps:

Safety SOPs Creation – In order to ensure the highest standards for safety & health, we created our SOPs and guidelines to be followed right from home to work, and from work to home. Furthermore, we are regularly updating and implementing "Alicon - Safety & Health Manual".

Guardian System – We have monitored our all employees including all contractual workers by creating this system. Each Line Leader / immediate Supervisor has volunteered to adopt its Employees / Workers an average about 20 persons each as Guardian / Care Taker who get in touch with each member of his team twice a day and ensure their Welfare like – lively, medicines and if any issue in Family and thereby strengthening bond of trust.

Preparedness through Mock drills – Taking a cue from the customer experiences, we are preparing ourselves for the eventuality of any COVID-19 positive case is reported among our employees. We are conducting mock drills daily in all our plants to be war-ready and build resilience to hit the ground running for restart. We have total 66 Crisis Management Team (CMT) members trained in all our three locations with minimum 4 members per shift in each plant.


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 objectives, projections, estimates and expectations which may be forward-looking statements. These statements are made within the meaning of applicable securities laws, and regulations are based on informed judgements and estimates. Past performance of the Company is not necessarily indicative of its future results, and actual results could materially differ from those expressed or implied. Important factors that could make a difference to its operations may include but are not limited to 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 based on any subsequent development, information or events.