Batliboi Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Global Economy Overview

In 2024, the global economy continues to face challenges such as geopolitical tensions, volatile financial markets, and economic fragmentation. Despite these obstacles, some regions have shown resilience and recovery, thanks to strong domestic demand and strategic economic policies. The International Monetary Fund (IMF) projects global growth to be around 3%, highlighting the varied pace of recovery across different countries.

Outlook

The future of the global economy looks cautiously optimistic. Improvements are expected, driven by technological advancements, increased consumer spending, and significant government investments in infrastructure. However, ongoing risks from geopolitical instability and market fluctuations could still impact growth.

Indian Economy Overview

India stands out in the global economy with its impressive growth. The IMF projects Indias growth at 6.5% for both 2024 and 2025, reflecting strong domestic demand. Indias own estimates are even more optimistic, forecasting a growth rate of over 7% for FY24. This growth is mainly driven by strong non-agricultural performance and significant investments.

In May 2024, Indias total exports (Merchandise and Services combined) were estimated at USD 68.29 billion, a 10.25% increase compared to May 2023. Imports for May 2024 were USD 79.20 billion, up by 7.95%. Capital flows were robust in 2023-24, with net foreign portfolio investment (FPI) flows reaching US$ 41.6 billion and gross foreign direct investment (FDI) flows at US$ 71.0 billion, reflecting strong economic growth and improving domestic fundamentals.

Outlook

The outlook for Indias economy in 2024-25 remains positive. Recovery in rabi sowing, continued profitability in manufacturing, and the resilience of the services sector will support economic activity. Increased household consumption, positive fixed investment prospects, and greater integration into global supply chains are expected to boost demand. Government capital expenditure, stronger bank and corporate balance sheets, and improved business sentiments will further support this growth.

Manufacturing Industry

Indias manufacturing sector has seen significant growth, driven by the Production-Linked Incentive (PLI) scheme. By December 2023, the scheme had attracted investments of 1.07 lakh crore, resulting in production/sales of 8.7 lakh crore, over 7.0 lakh jobs, and exports exceeding 3.4 lakh crore. The governments focus on <Make in India and <Atmanirbharta aims to make India a global manufacturing hub, potentially adding more than US$ 500 billion annually to the global economy by 2030.

The machine tool market in India, valued at US$ 125.1 billion in 2022, is expected to grow at a 6% annual rate, reaching nearly US$ 188.1 billion by 2029. India ranks 9th in global production and 7th in consumption of machine tools, with the market size expected to reach US$ 2.5 billion by 2028, growing at a 9.4% annual rate from 2023-2028.

Textile Industry

The textile industry is a vital part of Indias economy, contributing about 2.3% to the GDP, 13% to industrial production, and 12% to exports. India holds a 4% share of the global trade in textiles and apparel and is the 5th largest producer of technical textiles globally, with a market size of nearly $22 billion. This sector has the potential to grow to $300 billion by 2047.

Indias economic landscape is marked by strong growth prospects driven by robust domestic demand, significant investments, and government initiatives to create a favorable business environment. The manufacturing and textile industries are poised for substantial growth, reinforcing Indias position in the global economy. Despite challenges from geopolitical tensions and market volatility, the outlook remains optimistic, supported by strategic policies and resilient economic fundamentals.

Company Overview:

Batliboi, incorporated in 1941, has established itself as a leader among engineering companies. The companys enduring success is built on strong beliefs and values, which have supported its growth over the years.

Batliboi has driven technological innovation in its various fields of activity, including manufacturing, engineering, contracting, and marketing. The company operates manufacturing plants in Surat, India, and Peterborough, Canada, where it produces advanced machinery. This machinery is either developed in-house or in collaboration with leading engineering companies worldwide.

The company has undertaken major turnkey projects both in India and internationally, reflecting its capability as engineers and contractors. With a strong focus on customer service, Batliboi operates through various Business Groups at the corporate level. These groups are supported by a dedicated team of engineers who provide comprehensive pre-sales and post-sales service through a network of 15 offices across the country.

Batlibois operations encompass Machine Tools, Air Engineering and Textile Machinery. The company is committed to investing in, diversifying, and expanding its operations in both volume and quality, contributing to the engineering of a strong and prosperous India.

The Management of Batliboi Limited presents the analysis of performance of your Company for the year ended 2023-2024 and its outlook for the future. This outlook is based on assessment of the current business environment and the expectations, estimates and projections of the Directors and Management of the Company. It may vary due to future economic and political development, both in the Indian and international economies and due to other factors beyond control.

A. PERFORMANCE AND OUTLOOK

Batliboi Textile Engineering Group

Business Structure

The Textile Engineering Group comprises of Air Engineering and Textile Machinery.

Air Engineering Division is a leading manufacturer of complete systems for humidification and waste collection for Textile Spinning, Weaving and Knitting plants.

Textile Machinery Division supplies high quality imported and indigenous machinery from leading global manufacturers to the Spinning, Knitting, Processing and Garmenting Sectors.

Air Engineering Group:

Industry structure and developments

The textile industry is slowing down as customers have put on hold capacity expansion & new green field projects. This reflects in our FY 2023-2024 Q-4 Booking Projections v/s Actuals. Also stiff domestic competition as well as global increase in raw material prices have kept our margins under pressure. However there seems to be a pick up in demand going forward and we expect FY 2024-2025 Q2 onwards better prospects.

Opportunities and threats Opportunities:

We expect the textile industry to do better with introduction of the PLI scheme. As stated above this augurs well for the coming quarters.

Our focus is on the exports market especially the textile industry in Bangladesh, Uzbekistan and nations in South East Asia.

Threats Risk & Concern:

The industry is dependent on global demand for textiles and cotton prices. The geo political situation is also resulting in subdued demand.

Outlook

With healthy order backlog the Company is optimistic

Internal Control System and their Adequacy

The division has adequate internal controls in place.

Textile Machinery Group

BTMG Textile Machinery Group: Performance Review and Outlook

The textile machinery division of BTMG caters to the spinning, knitting, and processing machinery requirements of the textile industry. Despite facing high volatility in overall demand and raw material prices during the review period, we have successfully sustained our business volume. This was achieved through strategic expansions of our product portfolio and extending our geographical reach through key representations.

Opportunities:

• Anticipated investments in Open End Spinning and Knits Active wear present lucrative prospects, both in the domestic and international markets.

• There is a growing emphasis on high-productivity automated sustainable technologies, providing avenues for innovation and market expansion.

• The realignment of the global supply chain offers emerging opportunities for strategic partnerships and market penetration.

Threats Risk & Concern:

• Potential slowdown in European business due to geopolitical tensions, particularly the conflict between Russia and Ukraine, may lead to deferral of investment decisions and impact market stability.

Outlook:

Despite the potential threats and uncertainties, we maintain a cautiously optimistic outlook. Barring any unforeseen circumstances such as geopolitical tensions or a resurgence of the pandemic, we anticipate continued growth and resilience in the textile machinery sector.

2. Batliboi Machine Tool Group (BMTG)

Business Structure

The Machine Tool Group is engaged in manufacturing, selling/trading, and servicing of various types of metal forming and metal cutting machine tools.

Manufacturing: Batliboi manufactures CNC machines viz. Turning Centers, Vertical Machining Center, Vertical Turning Lathes and Double Column Machining Centers.

Trading: The Company is also engaged as an agency house representing various overseas reputed companies from Czech Republic, Belgium, Italy, Germany, South Korea, China and Taiwan as well local manufacturers of Metal Cutting and Metal Forming machine tools.

BMTG-MTT

Industry structure and developments

Demand for Heavy Machine Tools came down drastically. The competition has also increased in smaller machines as new players have entered the market. However, an upward trend of demand was observed during last few months.

Opportunities, Threats & Outlook

Opportunities

In sectors like fabrication, new entrants have opened up opportunities. The Opportunities have increased for specialized equipment like Isostatic Presses. The slow improvement in demand for heavy-duty machines was observed.

Threats, Risks and concerns

Delay in decision making due to government policies may defer capital expenditure spending. The long time taken by defence sectors in finalizing orders and high amounts of EMD blocked for long periods which has resulted into Principals getting discouraged to participate in tenders.

Performance segment wise or product wise

Improved business demand for metal forming machines and for Isostatic Presses.

Outlook

We are cautiously optimistic for improved demand for heavy metal cutting and forming machine tools as a result because of the improvement in economy and the large spending on infrastructure by the government.

Internal Control system and their adequacy

The division has adequate internal controls in place.

BMTG-MTU Business Structure Manufacturing:

Batliboi manufactures CNC machines viz. Turning Centers, Vertical Machining Center, Vertical Turning Lathes and Double Column Machining Centers.

We are also focusing on Radial Drilling machine of large capacity in view of demand in infrastructure business.

Developments and Performance

This division was able to improve market share with improvement in quality and introduction of more new models in vertical machine centres.

For FY 23-24 first phase of investments completed in foundry. Second phase for upgradation of foundry and new CNC machines on shop floor to improve efficiency, cost reduction is planned. These investments will help in increased production of machines.

Opportunities,

The Indian economy is projected to grow at @ 7% in FY 24-25 which augurs well for the manufacturing sector and capital expenditure expansion for engineering industry. With the additions of new models, upgrading existing models in line with the competition, and planned capital expenditure in foundry and machine shop, we are confident of improving our performance for FY 24-25.

Threats, Risks and concerns

Delay in decision making due to government policies as well as financing available for MSME sector may have an impact on capital expenditure spending.

Internal Control system and their adequacy

The division has adequate internal controls in place.

3. Quickmill Inc.

Business Structure;

This 100% subsidiary of the company is headquartered in Peterborough, Canada and is engaged in the manufacture and sale of large size Gantry Drilling & Milling machines. It caters to the global market for the Energy, Structural Steel, Aviation, large equipment manufacturing and Job shop manufacturing sectors. Development & Performance

Profitability FY 2023-2024 more than doubled (100% increase) as compared to last year results. The addition of the 7100s series Annihilator stocking program has been a success. Increased sales into new Milling markets is a huge part of Quickmill Growth.

Opportunities, threats & Outlook

Quickmill expects to continue to improve its performance in FY 2024-2025 over last years results.

For Financial Year 2024-25 forecast for North America (which is the Companys main market) is positive with active projects for both drilling and milling. Key sectors include heat transfer, job shops and steel service centres.

The perception of US interest rates (Pivoting from increases) to on hold or decreasing, the so call soft landing is having positive sentiments economically.

Labour Management and Increasing production is critical to keeping lead time deliveries to industry norms (under 12 months) as essential to maintain Quickmill growth trajectory intact

Internal Control system and their adequacy

There is adequate internal controls system in place.

B. HUMAN RESOURCES / INDUSTRIAL RELATIONS

The total number of permanent employees in the Company was 331 as on 31st March, 2024.

The Company has in place Health, Safety and Environment policy for its manufacturing operations. The same is reviewed by the Board from time to time and appropriate actions are taken as directed

Sr No Summary of Training Program (2023-2024)

1 Training of CPR & Heart

2 Communication Skills & Stress Management

3 Safety Awareness & Traffic Rules

4 First Aid Training

5 Advance Excel

6 New Features of Solid Works 2024 & usage in industry

7 Nidhi Aapke Nikat- Awareness of Provident fund

8 First Aid Training

9 Welders & Staff awareness for welding Defect.