Bimetal Bearings Ltd Management Discussions

Industry Structure and Development:

The Auto Ancillary segment of the industry has established itself with global level of technology and capabilities. The opportunity to be a global supplier for components has also been possible on account of the enhancement of our capabilities. Hence the demand for products continues to grow not only on the domestic market but also in the global market. The Industry is also today aggregating product assemblies for OEMs. Many sub-assembly manufacturers are supplying finished units to OEMs. Products like bushing have become more for supply into Tier 1 suppliers than to the OEMs directly. This is both an advantage and dis-advantage. The big advantage is that many of the recognized Tier 1 suppliers are engaged in global business which gives the company an opportunity to engage with them. On the negative side there is business risks associated with such opportunities. The emission standards in India have been aligned with global standards and we see an opportunity in these markets which has started to explore the supply base from India. This has also provided for Global sourcing offices being set up in India to take advantage of the capabilities amongst the supply base for components from India. This has provided opportunities for your company to be a part of the supply chain exporting parts to plants outside the country. While the quality, delivery and price have to be competitive, the important requirement of Global warranty also needs to be studied in the background of Warranty clauses which are provided by the OEMs.

Opportunities & Threats:

The increase in new generation of vehicles which have to conform to stringent emission norms call for manufacture of bearings with matching characteristics. Your Company is positioned to meet these challenges. The change in emission norms and the attendant change in inputs to fulfil this demand of engines have been recognized in investment in appropriate technology and processes. Your Company commenced supplies to OEM customers as per the new emission norms from the last year. Electric motive power in relation to replacement of IC engines has gained traction both in the two wheelers, three wheeler and passenger car segment. The growth achieved continues to be constrained by infrastructure availability for charging points and in remote areas. Inter-city travel in EVs has gained an acceptance with customers. However, the growth in sales of ICE in relation to the EV is significant. The development of new ICE platforms also has been positive and hence there is an opportunity to continue investment in the area of our core products albeit cautiously. The Government continues to be supportive of the EV Industry with many schemes to support their requirements. The Government also made significant announcement in the increased use of blends in fuel to reduce dependence on oil imports and prices. Time frames for this have been detailed by the Government in relation to the blends. Multi-fuel opportunities are also being explored by the OEMs and your Company is positioned with necessary technology to cater to the blended gasoline / multi-fuel options being suggested for use by the Government. Your Company is actively monitoring the developments with vehicle manufacturers. The new powder facility has been in operation for the last two years. It has initially been used extensively to support internal requirements. The development of customers in other industries has gained traction and we expect to commercially supply powders to various industries during the next year.

The company proposes to engage itself in the EV business with manufacture and supply of power systems. The manufacturing facility is under installation and the company has commenced to discuss with potential customers for supply to them commercially.

Segment-wise / Product-wise performance:

The segment-wise products consist of Original Equipment, After Market and Exports. The Company has a strong share of business in the OE Segment and has been upgrading its capabilities to staying technologically relevant in each of the segments. Continuous effort to further enhance the capabilities in this area has been in operation. In the After Market and Export Segments, the Company supplies parts to several applications. The Company constantly endeavours to upgrade technology, reduce costs and provide integrated solutions. The products manufactured consist of Bearings, Bushings, Thrust Washers, Strips and Alloy Powder. The company will also look to add value to powder at the right time to take advantage of the captive facility available to products which uses powder extensively.

Outlook:

The increase in the demand for the Companys products used in segments like Heavy Vehicles, Tractors, Powders & Strips are expected to offer good opportunities for the Company coupled with the cost control measures undertaken. A major activity which has been undertaken was to consolidate the operations of all core products into the Hosur plant last year. The economies scale should provide better cost control at one location.The outlook for the year is expected to be better than the previous year. Export markets for powders are also being pursued to enhance the turnover as well improve the reach of products globally.

Risks and concerns:

The Company has constituted a Risk Management Committee and it takes care of the external and internal risks associated with the operations of the Company. The Board of Directors oversees the Risk Management process including risk identification, impact assessment, effective implementation of the mitigation plans and risk reporting.

Internal Financial Control System:

The internal financial controls followed by the Company are considered adequate and operating effectively. The internal audit of the Company is entrusted to M/s.Gopalaiyer & Subramanian, Chartered Accountants.

Financial Performance:

The prudent management of working capital, treasury operations backed by planned capital expenditure have supported better performance in the current year. Human Resources and Industrial Relations:

During the year under review, the industrial relations in the Company were cordial. The average number of employees of the Company was 346 during the year.