ECONOMIC OVERVIEW Global Economy
After turbulent couple of years characterised by the COVID-19 pandemic and major disruptions to economic activity, the global economy started to recover. According to the International Monetary Fund (IMF), the global economy grew by 3.2% in 2023.
However, during CY 2023, the overall global economy has also confronted various challenges which include the rising costs of living and an unfavourable business environment. The rising inflation was led by geo-political disruption between Russia and Ukraine which has led to food shortage and supply chain disruption. Further, the Israel-Hamas tension has enhanced the geo-political uncertainty as well as trade disruptions across economies. The major global central banks played a critical role in navigating these challenges. However, their efforts to curb inflation through interest rate hikes slowed economic activity in the major developed markets.
The prolonged tighter monetary policy and higher-for- longer interest rates have led to a faster decline in inflation than expected. Global inflation has declined from 8.7% in 2022 to 6.8% in 2023, with further contraction forecasted to be at 5.9% in 2024. With cooling of inflation and steady growth, likelihood of a hard landing have receded, and risks to global growth are broadly balanced. Moreover, the decrease in inflation could prompt the easing of monetary policy.
The global economy has remained positive as the monetary policy focussed on moderating inflation while stabilising financial markets. Fiscal policy is a potential tool to boost economic growth. Also, the pressure on global supply chains has eased significantly in recent months, while shipping costs have dropped too. Consumer demand is also expected to pick up this year, with excess savings.
Despite the resilience of the labour market and the improving inflation conditions, it is expected that global economic growth to be relatively modest over the next two years. The IMF has estimated a growth rate of 3.2% for both 2024 and 2025. The increased structural reforms could boost productivity and improve the positive cross-border effects. However, persistent geopolitical tensions pose a risk to the overall economic outlook. Moreover, new spikes in commodity prices resulting from geopolitical shocks, such as ongoing attacks in the Red Sea, could disrupt growth. These factors highlight the delicate balance in the global economy despite its positive trajectory.
(Source: https://www.imf.org/en/Publications/WEO/Issues/2024/01/30/ world-economic-outlook-update-january-2024,
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2023/03/ kpmg-global-economic-outlook-h1-2023-report.pdf )
INDIAN ECONOMY
In the vast landscape of global economies, India stands out with its meteoric rise and unwavering determination to reach new heights by becoming the fifth-largest economy. India has defied global economic challenges and remained amongst the worlds fastest-growing major economies for the past two years, despite pressures from global recession, inflation, and supply chain disruption.
According to the Provisional Estimates of Annual GDP for 2023-24, the Indian economy has clocked a growth rate of 8.2% in FY 2023-24 compared to a growth rate of 7% in the previous financial year. The construction and manufacturing sectors are the primary drivers of growth. The construction sector is expected to achieve a double-digit growth rate of 10.7%, while the manufacturing sector is forecasted to grow at 8.5%. This economic success has been driven by several key reforms, including robust domestic demand, moderate inflation, a substantial influx of FDI, and supportive government policies.
Growth Projection by Region
Region |
2023 | 2024 | 2025 |
World |
3.2% | 3.2% | 3.2% |
United States |
2.5% | 2.7% | 1.9% |
Euro Area |
0.4% | 0.8% | 1.5% |
Middle East and Central Asia |
2.0% | 2.8% | 4.2% |
Emerging and Developing Asia |
5.6% | 5.2% | 4.9% |
Latin America and the Caribbean |
2.3% | 2.0% | 2.5% |
Sub Saharan Region |
3.4% | 3.8% | 4.0% |
The Index of Industrial Production (IIP) indicates that Indias industrial output grew by 5.8% in FY 2023-24, compared to 5.2% in the previous financial year. Moreover, GST collections have surged, reaching an all-time high with a growth rate of 11.7% year-on-year, totalling 20.18 Lakh Crore during FY 2023-24. This upward trend in both IIP data and GST collections signifies broad-based economic growth, indicating that multiple sectors are experiencing robust activity and contributing to the overall health of the economy.
One of the major challenges throughout the year was high inflation rates. In response, the RBI has kept repo rates unchanged at 6.5% for the seventh consecutive policy review to address this issue, successfully keeping the inflation rate within the tolerance band. Moreover, the continued underperformance of the agriculture and allied sectors remains a concern for the economy. The gross value added (GVA) growth in these sectors contracted by 0.8% in the December quarter. Additionally, the farm and related sectors are projected to grow by only 0.7% in FY 2023-24, which would be the slowest expansion in eight years.
In the near future, key downside risks for the Indian economy include geopolitical tensions, inflationary pressures in advanced countries, and ongoing supply chain disruptions. Despite these macroeconomic challenges, the Indian economy is expected to remain resilient, with the IMF forecasting Indias growth rate of 6.8% for 2024 and 6.5% for 2025. To support this growth trajectory, the Indian government has increased capital expenditure by allocating 11.11 trillion for developing infrastructure projects in FY 2024-25. The government has implemented several measures to stimulate the economy, including the PLI scheme, simplified policies to enhance trade and investment, increased FDI limits, and improved infrastructure.
Sources: https://pib.gov.in/PressReleasePage.aspxRs.PRID=2010223#:~:
text=4.-/Real%20GDP%20or%20GDP%20at%20constant%20
(2011%2D12)%20pr ices,per%20cent%20dur ing%202021%2D22.
https://pib.gov.in/PressReleaseIframePage.aspxRs.PRID=1992123
https://economictimes.indiatimes.com/news/economy/policy/rbi-keeps-
rates-unchanged-for-sixth-time-in-a-row/ articleshow/107538882.cmsRs.
from=mdr
https://www.mospi.gov.in/sites/default/files/press_release/IIP_PR_12feb
INDUSTRY OVERVIEW Global Tractor Industry
The global tractor market is segmented based on power output, drive type, application, and region. In terms of power output, the market is categorised into four segments: less than 30 HP, 30-50 HP, 50-100 HP, and more than 100 HP. The 30-50 HP segment currently dominates the market. While in the drive type, the market is bifurcated into 2-wheel drive and 4-wheel drive, with the 2-wheel drive segment holding the majority share.
The global tractor market reached a size of USD 77.79 billion in 2023. Tractors play a crucial role in modernising agricultural practices, boosting productivity, and meeting the needs of a growing global population. Recent years have seen significant shifts in consumer preferences and demands in the global tractor market, driven by technological advancements, increased mechanisation in agriculture, and a rising demand for efficient farm equipment. The integration of smart technologies like GPS, precision farming, and automation is driving optimised farm operations, representing major trends in the industry.
Governments initiatives and subsidies aimed at promoting farm mechanisation also contribute significantly. The increasing trend of farm consolidation and the need for larger, more powerful tractors further stimulate market growth. Additionally, many governments are implementing initiatives to promote electric farm tractors which will focus on sustainability and environmental concerns and help to reduce emissions and labour costs.
It is estimated that the global tractor market is poised to grow from USD 77.79 billion in 2023 to USD 119.56 billion by 2031, growing at a CAGR of 5.52%. Asia-Pacific and Latin America are emerging markets experiencing a surge in tractor demand due to ongoing agricultural expansion and modernisation efforts. Moreover, sustainability and environmental considerations are influencing the development of eco-friendly and energy-efficient tractor models.
Source: https://www.skyquestt.com/report/tractor-market#:~:text= Global%20Tractor%20Market%20Insights,period%20(2024%2D2031)
INDIAN TRACTOR INDUSTRY
The tractor market in India has been a significant contributor to the countrys agricultural sector and is the largest tractor manufacturer across the globe. Tractors play a crucial role in mechanising agriculture and improving productivity for farmers. The Indian Tractor Market was valued at USD 1,935.72 million in 2023, according to a report by BlueWave Consulting, a market research firm. Also, in the Indian market, two-wheel drive tractors are observed to be more prevalent than four-wheel drive tractors.
In FY 2023-24, tractor sales stood at 8,67,237 units excluding exports, showcasing a contraction of 8.26%, as 9,45,311 units were sold excluding exports during the previous financial year. This drop was primarily due to erratic weather, including an uneven monsoon and insufficient rainfall, which negatively impacted agricultural output and farm income. Consequently, many farmers postponed or cancelled their tractor purchase plans. Diminished reservoir levels, down 18% from the previous year and 5% below the decadal average according to the Central Water Commission, further contributed to the prevailing uncertainty.
In the upcoming years, continuous technological advancements and robust support from both Central and State Governments for farm mechanisation is expected to bolster market growth. Additionally, policies promoting transformation, innovative financing mechanisms and awareness campaigns will foster a more efficient, sustainable, and inclusive tractor industry in India. These developments will benefit farmers and the entire agricultural ecosystem.
Factors Driving the Indian Tractor Market
The burgeoning need for enhanced food production propels the thriving Indian Tractor Market. Fuelled by factors like increased Kharif sowing, favourable cash flows, and timely monsoons
Direct financial assistance to 11.8 Crore farmers, under PM-Kisan Samman Yojana
The Indian government has launched various initiatives for the farmers like Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), Pradhan Mantri Kisan MaanDhan Yojana (PM-KMY). The launch of the Agriculture Infrastructure Fund (AIF) and many others have also contributed to the growth
Rise in demand for mechanisation in the logistics and agriculture industry
The Indian tractor market will stand at USD 2,676.82 million by 2030, growing at a CAGR of 5.55%. The governments encouraging policies, plethora of purchase-easing schemes by OEMs/dealers, banks provision of low-interest loans, and other factors will contribute to this sectors growth.
The tractor industry in India plays a vital role in transforming Indian agriculture, but it encounters several challenges that need to be addressed. By focussing on factors such as landholding fragmentation, affordability, technology adoption, infrastructure, decreasing groundwater levels, and environmental concerns, stakeholders can work collaboratively to overcome these hurdles.
Source: https://startuptalky.com/india-tractor-industry-future/
https://www.tmaindia.in/consolidated-monthly-reports-2023.php
https://pib.gov.in/PressReleasePage.aspxRs.PRID=2001113
https://pib.gov.in/PressReleaseIframePage.aspxRs.PRID=2002012
https://www.investindia.gov.in/sector/automobile#:~:text=India%20
is%20the%20world's%20third,Apr%202021%20to%20
Mar%202022.
CONSTRUCTION EQUIPMENT INDUSTRY Global Construction Equipment Industry
Construction equipment refers to heavy machinery that performs specific construction or demolition functions. This equipment is transportable, semi-permanent, or permanent and is primarily used for earthmoving, lifting containers or materials, drilling holes in the earth or rock, and concrete and paving applications. It is also used in other applications such as infrastructure, residential,
commercial, and industrial buildings. The global construction equipment market worldwide size is valued at USD 207.14 billion in 2023. Asia remains the key market for construction equipment with a market share of 43.8% of the global revenue in 2023, though the demand is also substantial in North America and Europe.
The market is primarily fuelled by urban development, infrastructure growth, and mining projects. Opportunities are arising from the integration of telemetric and the launch of electric and autonomous construction equipment. New product launches and partnerships with rental service providers are also set to provide lucrative prospects for market players in the upcoming years. The increasing trend towards electrification and advancements in new product launches will shape the construction equipment market.
Moving forward, the market is projected to reach USD 364 billion by 2030, with a CAGR of 8.4% from 2024 to 2030. The U.S. market is expected to grow at a CAGR of 7.1%, while the European and Australian market is forecasted to expand at a rate of 8.7% and 6.1%. Technological advancements in construction equipment are poised to play a significant role, driven by the increasing demand for automation. Manufacturers are developing wireless and autonomous machinery that utilises radio waves for communication, instruction reception, and condition reporting. This development will enhance production efficiency, reduce unplanned maintenance, and improve safety standards.
Source: https://www.marketsandmarkets.com/Market-Reports/construc tion-mining-equipment-market-179948937.html https://www.grandviewresearch.com/industry-analysis/construct ion-equipment-market-analysis
INDIAN CONSTRUCTION EQUIPMENT INDUSTRY
India is the third-largest market for construction equipment after the US and China. Indias Construction Equipment Market size is estimated at USD 7.30 billion in 2024. During FY 2023-24, the Indian construction equipment industry has showcased a double-digit growth of 26% and stands at 1,35,650 units. This growth was led by an improvement in road construction infrastructure and an increasing urbanisation rate. Higher investment to boost infrastructure activities served as the major determinant for the growth of construction equipment in India.
In the Union budget of 2024-25, the government has increased the capital allocation of infrastructure by 11.11% to 11.11 trillion for capex, constituting 3.4% of the GDP. This will provide a great boost to the industry. Further, the National Infrastructure Pipeline (NIP) initiative has been extended to 9,641 projects, with a total project cost of USD 2,000.95 billion during FY 2020-25. Moreover, the PM Gati Shakti Master Plan aims to integrate roads, railways, aviation, urban, and logistics infrastructure to enhance multi-modal connectivity. As part of the BharatMala
Pariyojana, the governments objective is to construct 65,000 km of national and economic corridors, border and coastal roads, and expressways to improve the efficiency of the existing highway infrastructure. These investments in infrastructure and capital allocation will drive the demand for the Indian construction equipment industry.
India Construction Equipment Market
(Market Size in USD Billion)
2029 |
USD 10.90B |
2024 |
USD 7.30B |
CAGR 8.30%
Source: Mordor Intelligence
The construction industry is facing some inflationary pressure which may dent the growth. However, RBIs stance of maintaining a higher interest rate has brought inflation to the tolerance band. The outlook for Indian construction and equipment market is looking positive as it is estimated to reach USD 10.90 billion by 2029, growing at a CAGR of 8.30%.
Source: https://www.mordorintelligence.com/industry-reports/india-con struction-equipment-market
https://economictimes.indiatimes.com/industry/indl-goods/svs/
construction/construction-in-top-gear-equipment-sales-eye-new-highs/
articleshow/106114037.cmsRs.from=mdr
https://economictimes.indiatimes.com/industry/services/property-/-cstru
ction/construction-equipment-sales-rise-30-pc-to-36055-units-in-q3-of-
fy24-icema/articleshow/107266312.cmsRs.utm_source=contentofinterest
&utm_medium=text&utm_campaign=cppst
https://indiainvestmentgrid.gov.in/index.jsp
https://www.india.gov.in/spotlight/pm-gati-shakti-national-master-plan-
multi-modal-connectivity
AUTOMOBILE INDUSTRY Global Automobile Industry
The global automotive market size was estimated at USD 29.09 billion in 2023, while the Asia-Pacific automotive market size was valued at USD 12.52 billion in 2023. In terms of geography, the Asia-Pacific region has become the largest market due to growing demand for higher engine performance and rapidly increasing disposable incomes. Europe has also experienced significant growth over the years, attributed to rising demand for advanced facilities. While, North America has emerged as a significant market for automotive vehicles, fuelled by increasing demand for advanced technologies and vehicles among consumers.
In 2023, global automotive sales showed strong momentum, with combined sales of passenger vehicles and commercial vehicles growing by 12.3% year-on-year from 2022. The passenger vehicle segment dominated car sales, accounting for over 60% of the market share. This growth demonstrates the resilience of the automobile industry, despite facing challenges such as geopolitical tensions causing disruptions in the automotive supply chain, leading to increased costs of auto components and raw materials. Additionally, manufacturers are grappling with new environmental regulations in various countries, which require compliance with stringent CO2 emissions standards.
The electric vehicle (EV) segment saw robust growth of 30-35% in 2023, driven by increasing preference for clean transportation and government incentives. However, growth is expected to moderate in 2024 due to reduced government incentives in key markets and heightened competition. Electrification of commercial vehicles face challenges like range limitations, insufficient charging infrastructure, and performance concerns.
The rapid acceptance of technological development in the automotive sector has boosted the demand for better performance. This, coupled with the rapidly increasing demand for advanced features in high-end vehicles, has emerged as a major growth factor. It is estimated that the global automotive industry will reach around USD 42.86 billion by 2032, with a CAGR of 4.4%.
Source: https://www.rsm.global/insights/finding-opportunity-change/
geopolitical-shifts-and-pressures-automotive-industry
https://www.precedenceresearch.com/automotive-motors-market#:~:
text=The%20global%20automotive%20motors%20market%20
size%20was%20accounted%20at%20USD,4.4%25%20from%20
2023%20to%202032.
https://www.marketsandmarkets.com/Market-Reports/global-auto
motive-industry-outlook-77960341.html#:~:text=%5B74%20Pages
%20Report%5D%20The%20Global,3.1%25%20during%20the%20
forecast%20period.
Indian Automobile Industry
India ranks as the worlds third-largest automobile market, with the sector contributing 7.1% to Indias GDP and employing 37 million people. Moreover, the industry accounts for 4.7% of share in Indias exports and 40% of share in global R&D. India holds a robust position in the global heavy vehicle market, serving as the largest tractor manufacturer, the second-largest bus manufacturer, and the third-largest heavy truck manufacturer worldwide.
In FY 2023-24, total automobile production increased to 28.43 million units, with domestic sales reaching 23.85 million units. The Passenger Vehicles (PV) and Commercial Vehicles (CV) segments recorded robust volume growth of 8.45% and 0.56%, respectively, during the financial year, with PV sales reaching 42,18,746 units and CV sales reaching 9,67,878 units. This growth was driven by Indias expanding middle class, rising disposable incomes, changing consumer preferences, and improved infrastructure availability.
The Indian government is providing ongoing support to the automotive and auto components sectors. The Production-Linked Incentive (PLI) Scheme has been successful in attracting a proposed investment of 67,690 Crore against the target estimate
investment of 42,500 Crore over a period of five years.
Furthermore, the government has implemented proactive measures, including initiatives like Make in India, the Foreign Trade Policy (FTP), and schemes such as the Advance Authorisation and Export Promotion Capital Goods Scheme. These efforts are aimed at boosting the manufacturing and export of automobiles.
One of the key drivers of the Indian automobile industry is the adoption of electric vehicles (EVs). Registrations have surged from 1.25 Lakh units in 2020 to 10.25 Lakh units in 2023. This significant change was also highlighted in the FY 2022-23 Economic Survey in which the government set ambitious goals for the Indian EV market. It projects a robust 49% CAGR from 2022 to 2030, aiming to achieve annual EV sales of one Crore units by 2030.
ICRA anticipates steady demand in the automotive industry in the near term, with growth levels across segments expected to vary in FY 2024-25 largely due to
AUTOMOBILE PRODUCTION TREND
differing base levels. While volumes in the two-wheeler, passenger vehicle, and three-wheeler segments are expected to continue trending upward, supported by favourable demand drivers, the commercial vehicle industry is expected to see stable volumes. The higher input cost, soaring fuel prices, higher interest rates, and inflation rate remain key downside risks for the industry.
Source: https://auto.economictimes.indiatimes.com/news/auto-compon ents/automotive-sector-growth-momentum-to-moderate-in-fy25-icra/ 107374815
https://auto.economictimes.indiatimes.com/news/industry/ understanding-why-ind ia-is-witnessing-rapid-ev-adoption/105125958 https://www.investindia.gov.in/sector/automobile
COMPANY OVERVIEW
Established in 1971, Bharat Gears Limited (BGL) is renowned as one of Indias top gear manufacturer and stands out as a key global supplier of automotive gears. Our Company has established a strong presence in various geographical
Category |
2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 |
Passenger Vehicles |
40,28,471 | 34,24,564 | 30,62,280 | 36,50,698 | 45,87,116 | 49,01,844 |
Commercial Vehicles |
11,12,405 | 7,56,725 | 6,24,939 | 8,05,527 | 10,35,626 | 10,66,429 |
Three-Wheelers |
12,68,833 | 11,32,982 | 6,14,613 | 7,58,669 | 8,55,696 | 9,92,936 |
Two-Wheelers |
2,44,99,777 | 2,10,32,927 | 1,83,49,941 | 1,78,21,111 | 1,94,59,009 | 2,14,68,527 |
Quadricycles |
5,388 | 6,095 | 3,836 | 4,061 | 2,897 | 5,006 |
Tractors |
8,98,052 | 7,77,752 | 9,65,231 | 9,61,100 | 10,71,310 | 9,47,143 |
Grand Total |
3,18,12,926 | 2,71,31,045 | 2,36,20,840 | 2,40,01,166 | 2,70,11,654 | 2,93,81,885 |
AUTOMOBILE DOMESTIC SALES TREND
Category |
2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 |
Passenger Vehicles |
33,77,389 | 27,73,519 | 27,11,457 | 30,69,523 | 38,90,114 | 42,18,746 |
Commercial Vehicles |
10,07,311 | 7,17,593 | 5,68,559 | 7,16,566 | 9,62,468 | 9,67,878 |
Three-Wheelers |
7,01,005 | 6,37,065 | 2,19,446 | 2,61,385 | 4,88,768 | 6,91,749 |
Two-Wheelers |
2,11,79,847 | 1,74,16,432 | 1,51,20,783 | 1,35,70,008 | 1,58,62,087 | 1,79,74,365 |
Quadricycles |
627 | 942 | (12) | 124 | 725 | 725 |
Tractors |
7,80,032 | 7,05,011 | 8,99,407 | 8,42,266 | 9,45,311 | 8,67,237 |
Grand Total |
2,70,46,211 | 2,22,50,562 | 1,95,19,640 | 1,84,59,872 | 2,21,49,473 | 2,47,20,700 |
regions, including North America, Europe, and Asia. We are known for our relentless customer-focussed strategies, consistent value addition, and commitment to excellence and superior technology.
Our Company has an extensive product portfolio comprising Ring Gears and Pinions, Transmission Gears and Shafts, Differential Gears, sub-assemblies covering automotive, agriculture, construction, utilities & EVs, and many others. We are catering these varied products through our 3 state-of-the-art manufacturing facilities located at Mumbra near Mumbai, Faridabad near New Delhi, the capital of India, and Lonand near Pune.
Being one of the major players in complex gear requirements, we serve leading OEMs on a global level which includes John Deere, Eaton, Carraro, Escorts Kubota, Dana, CNH, JCB, Toyota, Parker, M&M, and several others. We serve our clients through three business divisions:
Business Divisions
Gears
The Company produces a diverse array of gear and transmission technologies, including ring gears, pinions, transmission gears, shafts, differential gears, and sub-assemblies, primarily for automotive applications. BGL supplies these components to major OEMs in India and abroad for various automobile segments, including heavy, medium, and light trucks, tractors, utility vehicles, construction equipment, and off-highway vehicles.
Automotive Components
Bharat Gears Limited provides a comprehensive range of automotive components in addition to gears. These include automotive clutch and components, turbochargers and components, driveline products, axle shafts, flywheel assemblies and rings, propeller shaft components, U-joints, steering components, differential cages, steel wheel rims, and more.
Heat-Treating Furnaces
The Furnace division of the Company manufactures reliable batch and continuous heat-treating furnaces based on the designs of AFC-HOLCROFT, USA. These furnaces are equipped with end-to-end capabilities, feature an operator-friendly design, and offer hassle-free and economical maintenance suitable for Indian conditions.
Industry Segments
The Companys customer base can be broadly categorised into the following four industry segments:
Agricultural Machinery: Tractors are the primary product line under the segment. While Agriculture Machinery generates the highest share of revenue.
Automotive: Engineering goods for medium and heavy commercial vehicles, such as heavy, medium, and light trucks, utility vehicles, and off-highway vehicles, are provided by the Company.
Construction Equipment: BGL serves multiple sectors with its product lines, which include earth-moving equipment, material handling equipment, and road construction equipment.
Others: The Companys products find applications in various sectors requiring engineering goods, such as windmills, oil drilling, hydraulics, cooling towers, and material handling systems.
BUSINESS (PLANTS) OPERATIONS
BGL operates manufacturing facilities at three locations: two in Maharashtra (Mumbra and Lonand) and one in Haryana (Faridabad). All three plants are IATF certified, ensuring high standards of quality and efficiency. The Faridabad and Lonand plants have ISO 14001:2015 and ISO 45000:2018 certifications. The Mumbra plant is the oldest among them and specialises in producing bevel, transmission, and differential gears. While the Lonand
GEAR SALES BREAK-UP OF THE COMPANY
FY 2022-23
Agricultural Machinery |
Construction Equipment | Commercial Vehicle | Others |
63% |
10% | 15% | 12% |
FY 2023-24
Agricultural Machinery |
Construction Equipment | Commercial Vehicle | Others |
64% |
13% | 15% | 08% |
plant manufactures transmission gears and the Faridabad Plant manufactures Bevel and Transmission gears. We consistently invest in upgrading our manufacturing plants with the latest technology.
The Company has gained international recognition for its commitment to quality and technological advancements. BGL has continually upgraded its manufacturing facilities with the latest technology and implements industry best practices such as Kaizen, Total Quality Management (TQM), 5S Systems, autonomous maintenance, and visual management at all plants. Safety is a top priority at BGL, reflected in its impressive safety record.
Key Focus Areas
Production and Manufacturing Excellence:
Maintaining its market leadership, BGL continuously enhances productivity and efficiency. The Company focusses on optimising quality and productivity by reducing cycle times, eliminating waste in labour and material movement, investing in improved and faster machines, upgrading existing machines with new technology, implementing automation, and adjusting labour allocation. BGL also optimises preventive and corrective maintenance processes to maximise machine efficiency and productivity. Further, the Company has successfully implemented multi-machine layouts in the gear-cutting section and the grinding section.
At the Mumbra Plant, the Company has focussed on enhancing its manufacturing capabilities by adding partially refurbished machines. During the second half of the financial year, BGL experienced a demand drop for its products. To address this challenge, the Company implemented various measures to reduce variable costs. These initiatives included reducing overtime, extending break durations for contract labour, working for reduced number of shifts, and reducing manpower, as well as lowering consumption and inventory. Additionally, the Company removed old & surplus machines in the last quarter of the financial year, which will save costs on power and hydraulic oil consumption in the coming year.
To enhance production efficiency at the Faridabad plant, BGL has refurbished numerous equipment and machinery. Additionally, the Company has increased its production capacity by 20% through integrating the Escorts and PTL hard cells into its operations. Furthermore, BGL has focussed on manpower savings by optimising the layout of machines, such as the hobber and shaver.
To counter the drop in demand and reduce variable costs, the plant has implemented robust inventory and manpower management strategies. Also, the plant had a planned shutdown during December, 2023 for a week.
Bharat Gears Limited has enhanced its production efficiency at its Lonand Plant by reorganising equipment in cells and the Toyota line, introducing 5-star and 7-star grinding wheels and replacing gear grinding fixtures with collet-type or hydraulic fixtures. The Company has increased cutting velocity from 50 m/s to 60 m/s which has boosted gear grinding capacity. During the year, BGL has also improved its productivity by adopting cluster cycles and carbide fixtures, resulting in better throughput in finishing operations, thereby reducing handling time, rejections, and also saving manpower for the Company.
Built In Quality:
The Company is committed to enhance quality for long-term success through customer satisfaction. Every employee at BGL values Quality and actively participates in improving processes, products, services, and the overall culture. Bharat Gears implements various quality methodologies, some of which as detailed below have shown impressive results in the reported financial year.
Partial reconditioning of machines such as Broaching and CNC Hard turning was undertaken in the Mumbra Plant to eliminate various quality issues. Modifications were made to both vertical and horizontal welding machines to improve welding quality. Further, new versions of PLCs and new power sources were installed on the machines, and water-based solutions were introduced for better cleaning operations.
In the Companys Lonand Plant, quality enhancement measures include the installation of multi-gauging checking units to substantially improve quality levels and rationalise costs. Moreover, BGL has supported Tier-2 suppliers near the plant to ramp-up production; these efforts have fostered a culture of "zero defect" and "zero customer complaints" from the key customers of the Company.
At the Companys Faridabad Unit, auto gauging with auto-correction was introduced at the hard turning machine to minimise defects and rework due to human error. Material handling was improved by introducing Clip-Lok boxes with VFC-type separators to reduce in-house rejections and rework caused by dents and damages.
ENERGY CONSERVATION
The Company is committed to achieve its sustainability goals, focussing on energy conservation by reducing energy intensity in manufacturing processes and infrastructure. BGL plants have incorporated various initiatives which include regular audits to improve energy performance and ensure energy-efficient operations.
In-house automatic power factor panels (APFC) were installed in the LT Room to control the power factor effectively
Cleaning of all transparent roof sheets in Mumbra and Lonand Plant increased natural light on the shop floor, reducing power usage
The power factor is maintained in unity throughout the year
During FY 2023-24, the Lonand Plant implemented several energy efficiency measures, including the installation of a 1,300 Kwp solar plant and vertical transparent sheets in the heat treatment plant to maximise daylight use. BGL also replaced old HPMV lamps with LEDs, enhancing Lux levels and conserving energy. Cleaning all transparent sheets after the monsoon further improved daylight utilisation and power savings. Additionally, preheating and tempering times for low-weight components were reduced by 30 minutes, resulting in further power savings. Electrostatic precipitators were installed on four hobbers to eliminate oil fumes from cutting machines.
In Faridabad Plant, various measures have been taken to save energy such as motor optimisation, motion sensors installed on office lights at various departments to save on electricity, and conservation of energy through drive.
SAFETY MANAGEMENT
The Company has implemented stringent safety measures across all manufacturing facilities, including the use of safety parameters in systems and processes. Hazardous materials like kerosene and asbestos are prohibited in all the plants, and employees are provided with protective gear and uniforms to prevent health hazards. Safety measures include employee awareness programmes, machine selection based on compatibility with the 5S System, and following Kaizen principles to maintain a safe work environment. Monthly safety committee meetings and audits, quarterly fire drills and mock drills, and monthly training in firefighting and first aid are conducted. An emergency preparedness plan is regularly updated, and top management commitment
to Environmental, Health, and Safety (EHS) ensures safety in systems.
Throughout the year, the Company has regularly conducted housekeeping & safety audits, as well as safety training sessions and mock drills for its workers. Additionally, the plant has identified and corrected unsafe conditions and ensured strict discipline in handling hazardous materials. Lonand Plant has completed ISO 45001 re-certification audits from BVIL (Bureau Veritas India Limited). Further, the Company has made a Separate Safety Department headed by a qualified safety officer who will be assisted by a Safety Marshal nominated by HODs from each department. These initiatives have tightened the safety measures during the year.
SUPPORT SYSTEM
Bharat Gears utilises strong IT systems, including a customised Enterprise Resource Planning (ERP) system, to effectively oversee its core and support business operations. IT is also heavily employed in engineering and manufacturing processes to enhance products, manage knowledge, foster customer relationships for reporting, and resolve issues.
The Companys proficient Human Resource team evaluates and supports the workforce involved in manufacturing processes, ensuring the timely and optimal availability of skilled personnel to achieve the business goals of industry leadership, process efficiency, product quality, and customer satisfaction. The Companys HR policy is well-crafted, promoting competitiveness, work-life balance, and harmonious work culture. Regular training and engagement programmes are conducted to enhance employee skills and capabilities. As of 31 March, 2024, the Company had a permanent workforce of 1,157 employees.
FINANCIAL HIGHLIGHTS (Rs. in Lakhs)
Particulars |
FY 2023-24 | FY 2022-23 | Variance (%) |
Operating Revenue |
66305 | 76636 | (13.48%) |
Other Income |
362 | 876 | (58.68%) |
EBITDA |
2716 | 5475 | (50.39%) |
Interest |
1749 | 1708 | 2.40% |
Cash Profit |
967 | 3767 | (74.33%) |
Depreciation |
2255 | 2007 | 12.36% |
Profit/(Loss) Before Tax |
(1288) | 1760 | (173.18%) |
Tax |
(314) | 411 | (176.40%) |
Net Profit/(Loss) |
(974) | 1349 | (172.20%) |
KEY FINANCIAL RATIOS
Particulars |
FY 2023-24 | FY 2022-23 | Variance (%) |
Debtors Turnover Ratio |
5.56 | 5.74 | (3.14%) |
Inventory Turnover Ratio |
7.29 | 8.05 | (9.44%) |
Interest Coverage Ratio |
1.55 | 3.20 | (51.56%) |
Current Ratio |
1.26 | 1.44 | (12.50%) |
Debt Equity Ratio |
0.84 | 0.85 | (1.18%) |
Operating Margin (%) |
0.69% | 4.47% | (84.55%) |
Net Profit Margin (%) |
(1.00%) | 2.00% | (150.00%) |
Return on Net Worth (%) |
(8.00%) | 12.00% | (166.67%) |
Key Explanations for the Variance
Erratic monsoon affected agriculture output in India. This led to a drop in capital investment by farmers, thereby resulting in a drop in domestic tractor volumes. Accordingly, demand from domestic customers was subdued.
Due to multiple factors such as the Russia-Ukraine & Israel-Hamas war, the El Nino effect & rising inflation in the USA & European countries, demand in overseas markets slowed down drastically & off-take from export customers cooled down.
Ratios relating to profitability (i.e., interest coverage, operating profit margin, net profit margin and return on net worth) have been impacted on account of lower absorption of fixed costs due to the drop in volumes. An increase in the current maturities of long-term debts has resulted in the deterioration of the current ratio. Debt-equity ratio has marginally improved on account of scheduled debt repayment.
Key Operational Highlights
The Company has made substantial efforts in lowering the operation cost, with particular emphasis on material costs, which is the largest component of cost. To achieve this, the Company collaborated with a leading consulting firm to conduct a thorough cost analysis and implement cost-optimising strategies. In line with the markets competitive nature, the Company has made significant progress in reducing costs, including revamping its ordering system and forging partnerships with highly competitive suppliers as part of its sourcing strategy
The Company has initiated a diversification drive in order to ensure sustained growth despite some geography and segments not growing to the desired level. The company secured orders from Hybrid cars manufacturer and further expanded its customer base in Europe by winning business from in Tractor segment and EV segments
The Company continued to invest in Technology leadership by investing in state-of-the-art Bevel grinding technology which will serve an European
customer in the initial phase. This will improve noise levels & reduce motion transmission errors
During the year, the Company undertook various measures for working capital augmentation. One such initiative was inventory management, which led to improvement in inventory turnover ratio
The focus on lean operation will continue in future also.
OUTLOOK
Looking ahead, the Indian economy is poised for robust growth, and the automobile sector is also showing positive signs. To support both the economy and the industry, the government has implemented various initiatives aimed at boosting economic growth and other industries. Increased capital expenditure towards infrastructure development is a key focus, providing stimulus for businesses in India and acting as a catalyst for manufacturing. The construction of roads, highways, and infrastructure will contribute to overall economic growth.
However, there are some downside risks facing the economy and the industry, including geopolitical tensions and persistently high inflation globally. Further, higher interest rates and a tightening monetary policy have slowed down economic growth.
The Company has focussed on diversifying its customer base and strengthening its relationship with existing customers by providing a high level of customer-centric service. With focussed investment strategy BGL aims to serve both domestic and global customers. The Company is expected to return to growth from FY 2024-25 onwards. Through its rigorous efforts to cater to its "2Ds" (Diversified and Delighted) customers, the Company is confident of achieving sustained growth in the future.
BGL also remains committed to advance its technological capabilities, quality standards, and automation to enhance product efficiency and quality. The Company has made significant investments in establishing a comprehensive robotic line for Hybrid vehicles, spanning from raw material processing to finished product assembly. Additionally, the Company has adopted Bevel Gear Grinding Technology, a cutting-edge approach utilised by leading European and US OEMs.
Risks and Concerns
Effective risk management is a crucial aspect of the Companys operations, as it diligently monitors both the internal and external environments for potential hazards. By constantly staying vigilant, the Company can identify emerging risks and promptly implement appropriate measures to mitigate them. With a proactive approach to risk reduction, the Company strives to maintain a secure and resilient business environment.
Risk |
Impact |
Mitigation | |
Macro Environment Risk |
A slowdown in the economy can have an adverse impact on business operations. Any declines or recessions can greatly affect the demand for industrial and automotive components, thereby potentially disrupting the Companys operations. |
The Company conducts regular reviews of its order book, execution strategies, market opportunities, and changes in the business environment in various markets to develop effective growth strategies. By analysing these factors, the Company can tailor its approach on sector/geographic diversification to capitalise on opportunities and adjust its strategies to meet new challenges as they arise. | |
Technological Risk |
Adopting new manufacturing technologies like automation and digitalisation poses challenges that could affect both production efficiency and quality. Moreover, not leveraging the latest technology may hamper the Companys ability to meet evolving global market demands, potentially resulting in lost business opportunities. |
The Company prioritises and invests proactively in modern and sustainable technologies to uphold product quality and enhance its product portfolio. Moreover, it conducts research and development in emerging technologies, applications, and market trends to enhance manufacturing processes, quality, and product upgrades. | |
Financial Risk |
The Company faces risks from foreign exchange fluctuations, rising interest rates, and changes in credit availability and liquidity due to its global operations. These factors can affect the Companys margins and profitability. Moreover, unexpected inventory write-offs due to inadequate protection or obsolescence could damage the Companys reputation and lead to financial losses. |
The Company actively tracks exchange rate movements and employs a
hedging strategy to reduce the impact of unfavourable currency fluctuations. Its strong
credit policies, efficient collection methods, and long-standing banking relationships
banking relationships helps in mitigating the risks related to liquidity and credit
availability. The Company regularly evaluates inventory targets and policies for slow-moving items. It has implemented proper storage facilities and material handling systems to enhance material storage practices. |
|
Risk |
Impact | Mitigation | |
Supply Chain Risk |
Any disruptions to the supply chain, could lead to shortages of materials or components. This could lead to loss in sales or increase in costs. Also, the recent geopolitical tensions has impacted the supply chain network. | The Company has enhanced its supply chain network and cultivated robust relationships with suppliers and vendors to ensure smooth operations. Where possible, dual sourcing has been implemented to mitigate risks. | |
Raw Material & Inflation Risk |
The increase in the prices of key inputs such as steel, energy, and other raw materials can significantly impact the Companys overall cost structure. This rise in input costs poses a risk to the Companys profitability and its ability to deliver finished products on time, within budget, and meet quality standards. The fluctuation in raw material prices, such as alloy steel, further exacerbates this risk, potentially affecting the Companys margins. |
The Company mitigates inflation and raw material risks through a comprehensive strategy. The Company monitors inflation and adjusts export contract prices accordingly. It enters into contracts with clients to pass on raw material cost variations, protecting margins. Cost-saving measures include process automation, transitioning to renewable energy, and improving supply chain efficiency. Additionally, the Company maintains strong vendor relationships and strict inventory control to procure materials at competitive prices. These efforts collectively safeguard the Companys profitability and operational efficiency. |
|
Regulatory Risk |
The Companys products are utilised in numerous critical industrial
and commercial applications where a breakdown can lead to significant losses. Therefore,
it is imperative that these products adhere to stringent compliance norms, as well as
quality and technical standards established by OEMs or regulatory bodies. Failure to maintain these standards could result in a loss of business and damage to the Companys reputation. |
To maintain precision, quality, and productivity standards, the Company consistently invest in upgrading its manufacturing facilities and developing employee skills. In addition to the quality control tests conducted by the Inspection and Quality Assurance team, the Company regularly solicit feedback from clients on product quality. Moreover, the Company undertakes product liability insurance to protect the Company from financial losses. | |
Natural Calamities & Crisis Risk |
Natural calamities, global or national crises such as pandemics, earthquakes, geopolitical instability, and wars pose a risk to the Company. These events could lead to operational disruptions, shutdowns, production cuts, project delays, supply chain hurdles, and increased construction costs. | The Companys priority is the safety of its stakeholder community and ensuring business continuity during unpredictable crises. It focusses on strategies such as deferring capital expenditures, managing liquidity, establishing alternate supply and manufacturing options, and reducing costs to revive business operations during such challenging circumstances. | |
Risk |
Impact |
Mitigation | |
People Risk |
Having excess manpower can lead to various issues such as industrial relations problems, erosion of gross margins, lower productivity norms, and adverse effects on support systems. Additionally, the absence of talent for critical business roles can hinder the organisations growth potential. Insufficient leadership team and succession planning can also pose significant challenges for the Company. |
Across all its plants, the Company engages in benchmark studies to
embrace best practices and enhance the deployment of manpower. It prioritises measures such as enhancing machine health to boost productivity and implementing lean layouts. Furthermore, critical positions necessitating succession planning are identified through a structured process. |
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
Bharat Gears is a system-driven Company. Our effective internal control system plays a crucial role in maintaining efficient day-to-day operations. The Company follows a systematic method of financial reporting of various transactions, efficiency of operations, safeguarding of assets and compliance with applicable statutes and regulations. Our structured audit system is an on-going process. It forms a basis for reviewing the adequacy of internal control systems. Our internal control is aptly designed, to ensure the reliability and accuracy of financial and other records necessary for the preparation of financial information and other related data.
The internal audit is conducted by the appointed internal auditors with the support of Companys functional teams. The reports of the Internal Auditors are reviewed during the Audit Committee meetings. Recommendations for enhancing internal controls are proposed and carefully considered. Additionally, the suggestions from the Internal
Auditors are reviewed and deliberated upon by the Boards Audit Committee on a quarterly basis. The overarching goal is to continuously improve the internal controls and systems within the Company.
CAUTIONARY STATEMENT
The statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, and 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 Government regulations, tax laws & other statutes, and other incidental factors. The Company assumes no responsibility in respect of forward-looking statements, which may be amended or modified in the future.
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