OVERVIEW
Birla Precisions presents a Management Discussion &Analysis Report
to enlighten the key performance and business activities of the Company for the financial
year ended on 3 1st March, 2023.This review is to be read together with the reports
presented in the earlier part of this Annual Report, the Companys financial
statements, the schedules, and notes thereto as mentioned in this Annual Report.
INDIAN ECONOMY
The year 2022 was very special for India, as it marked the 75th
Year of Indias Independence where it also became the Worlds fifth largest
economy, measured in Dollars. In real terms, the economy is expected to grow at 7% for the
year ended March, 2023.The cutting tools are the basic premise on which the machine
industry is based.Without effective cutting tools, none of the crucial processes involved
in the machine industry can be carried out with the required finesse. The major consumers
of cutting tools are the diamond cutting tools industry. During 2012-13, the Indian
Cutting tools market was valued at around INR 15.6 billion, and now its valued at
more than INR 80 billion.
During the forecast period of 2016-2020, the market for cutting tools
in India was expected to grow in the range of CAGR of I 3%. The cutting tools
manufacturers were not disappointed with the numbers, as this growth rate owes to the
demands of the automotive sectors.The small, big as well as medium suppliers, have a
significant contribution to the Indian cutting tools market.Also, there is a notable
investment and attention offered to the developments of the cutting tools market.
Currently, India stands 10th in consumption and 13th in production
of cutting tools. It can be said that the Indian market is growing at a healthy rate. It
is also estimated that the growth rate will reach around 15% by the next forecast
i.e. till 2025
INDIAN AUTO COMPONENT INDUSTRY
Indian Auto Component Industry can be understood based on four
different parameters, which are-
I. Robust Demand
- Growing working population and expanding middle class are expected to
remain key demand drivers.
- By 2025,4 million of EVs could be sold each year and 10 million
by 2030.The market is expected to reach US $ 206 Billion by 2030.
- The Indian Auto Component industry is set to become the 3rd
largest globally by 2025.
2. Export Opportunities
- India is emerging as a global hub for auto component sourcing and the
Industry exports over 25% of its production annually.
- Auto Component exports are expected to grow and reach US$ 30 Billion
in FY 2026.
- India has a competitive advantage in auto components categories such
as shafts, bearings and fasteners due to large number of players. This factor is likely to
result into higher exports in coming years.
3. Policy Support
- 100% FDI is allowed under the automatic route for auto components
sector.
- Production Linked Incentive (PLI) schemes on automobile and auto
components are expected to bring a capex ofRs. 74,850 Crore (US$ 9.58 Billion) in the next
five years.
4. Competitive Approach
- A cost- effective manufacturing base keeps costs lower by 10-25%
relative to operations in Europe and Latin America.
- India is the 2nd largest steel producer globally, thus has
a cost advantage.
- India is emerging as a global auto component sourcing hub due to its
proximity to key automotive markets such as ASEAN, Europe, Japan and Korea.
GLOBAL ECONOMIC SCENARIO
Global Economic Growth was briefly affected by Russia - Ukraine war,
which disrupted the chances of global economic recovery which was reeling under Covid-19
pandemic. The cutting tools market is segmented into linear cutting tools consisting of
tool bits and rotary cutting tools including drill bits, countersinks and reamers. Owing
to sustainable application in plentiful profit persuading sectors such as automotive,
construction, oil and gas and power generation in the cutting tools market are progressing
rampantly. Cutting tool suppliers and machine tool builders are reliant on cutting fluids
to eradicate high temperature, supply lubricity, diminish wear and rust, and provide chip
evacuation. The health and
environmental concerns related to the use of metal-cutting fluids in
manufacturing settings is a major factor restraining the cutting tools market
growth.Application of these fluids on a daily basis in a working territory, expose machine
operators to potential health vulnerabilities. However, with constant and substantial
influx of investments in R&D conventional substitute are surfacing along with the
advancements in industrial protective gears for operators.
INDUSTRY STRUCTURE DEVELOPMENT. OUTLOOK & OPPORTUNITIES
Cutting tools market is driven by factors such as industrial growth,
technological advancements, and the demand for precision and efficiency in manufacturing
processes. Key players in the market include cutting tool manufacturers, distributors, and
suppliers catering to diverse industries and applications.The North American region was
predicted to hold a major share in the global Cutting Tools market.The region with the
largest market share is expected to dominate during the projection period. This results
from rising automotive, construction, and food and beverage demand. The industry is
anticipated to be driven by growing government initiatives for advertising electric
vehicles. The highly populated economies of India and China are a huge demand driver for
the automotive industry in the APAC area, and Japan, India, and China all have significant
OEM manufacturing presence. Cutting Tools Market opportunities are vast and varied, with
numerous avenues for growth and innovation. One of the key areas of opportunity lies in
the development of advanced cutting technologies that can improve efficiency, accuracy,
and speed while reducing costs and waste. Another important area is the increasing demand
for customized cutting tools tailored to specific applications and materials. This trend
has led to a rise in niche manufacturers who specialize in producing specialized cutting
tools for unique customer needs. Additionally, emerging markets such as Asia-Pacific offer
significant potential for expansion due to their growing manufacturing sectors and demand
for high-quality products. The cutting tools market can be influenced by factors such as:
-
- Industrial Growth: A strong correlation exists between
the cutting tools market and overall industrial growth. As industries
like automotive, construction, and manufacturing expand, so does the demand for
cutting tools.
- Technological Advancements: Innovations such as
Computer Numerical Control (CNC) machines and laser cutting have
improved precision, speed, and efficiency in cutting operations, driving the market for
cutting tools.
- Increased Automation: The rise in automation across
various sectors, especially manufacturing, has
spurred the demand for advanced cutting tools.
- Infrastructure Development: Infrastructure growth
worldwide, particularly in emerging economies, results in higher demand
for construction and related tools.
- Aerospace and Automotive Industry Growth: These
industries often require precise cutting tools for
manufacturing complex and high-precision components. Their growth
directly influences the cutting tools market.
THREATS / RISKS & CONCERNS
The major risks and concerns attributed to the performance of the
Company are:
The machine tool industry is tiny but crucial: it supplies the machines
to cut, form, and shape metals upon which about half of the manufacturing industries are
dependent. The state of the art of the machine tools themselves, their control systems and
the organization surrounding them largely determine the productivity and competitiveness
of engineering industries in general.The machine tool industry faces two major challenges
today. One is that technological change in machine tools has changed character in recent
years. After more than a century of evolutionary progress, mainly involving mechanization
and improved control of mass production, the main progress in machine tools in the last
two decades has involved automation and mechanization of small and medium scale
production, largely in connection with the introduction of numerical control and also
other aspects of the microelectronic revolution.This change in the character and direction
of technological change is forcing profound changes both within the industry and in its
relationship with users. The other problem is that the competitive situation in the world
market is changing rapidly causing severe adjustment problems for most producers. Even
though this is an industry in which foreign trade has always been significant, the
emergence of new competitors (particularly Japan in numerically controlled machine tools
and newly industrialized countries in conventional machine tools) with new strategies and
new kinds of specialization has made for radical changes in the competitive situation for
most machine tool firms.
SEGMENT WISE OR PRODUCT WISE PERFORMANCE
Your Company has identified two business segments in line with the
accounting segment on segment reporting.These are Cutting Tools and Auto Components.The
segment-wise performance in detail is given in the notes to the accounts.
CAPITAL INVESTMENT
We have made a sizeable capital investment during the Financial Year
2020-2021, wherein we have recently started a new manufacturing plant at Chalisgaon in
Nasik, Maharashtra of Cutting Tools and Drills with a capacity of 4.8 lakhs Pieces. This
would help us in boosting our revenue and creating a platform for maximum optimization
coupled with a developmental vision of our Management.The Company has added CNC Machines
to its Units, for entering in the space of Carbide Field.The multiplying of our output has
always been a basic objective of the Company which has shown results every quarter
starting from last year.The Company has been striving day in and day out which has been
reaping us rewards and is a far-sighted approach which is being seen by us.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has been constantly upgrading its systems which would help
in minimizing inefficiency and planting a smoothly internally controlled system which
would help us in organizing and increasing our productivity and overall efficiency.
INTERNAL FINANCIAL CONTROL:
The Company has an established Internal Financial Control framework
including internal controls over financial Reporting, operating controls and anti-fraud
framework.The framework is reviewed regularly by the management and presented to the Audit
Committee. Based on the review, the framework is strengthened and amended to incorporate
the continuously evolving practices, from time to time, to ensure adequacy and
effectiveness of Internal Financial Controls.
The adequacy of the internal control system as well as the internal
audit report is reviewed by the audit committee of the Board of Directors. The adequacy of
the internal control system has also been reported by the statutory auditors of the
Company in their report as required under the Companies (Auditors Report) Order, 2003.
MATERIAL DEVELOPMENT IN HUMAN RESOURCES
Our company has started to sharpen its policies towards employee
welfare and for the maximization of their overall growth which is being done by setting up
a better work culture and harmony amongst our employees which continues
to lay emphasis on qualitative growth by providing hassle- free and
constructive work environment, in tandem with the bottom line of employee welfare as the
primary reason of a companys growth. Moreover, we have started employee welfare
activities through various interactive sessions engaged with our employees
time-to-time which has been showing us the required results. In addition to this, formal
training through external & internal faculty is also conducted from time to time in
acquiring domain knowledge and imbibing the corporate quality culture.
None of the Senior Management Personnel have any material, financial
and/or commercial transaction, where they have personal interest that may have potential
conflict with the interest of the company at large.
FINANCIAL HIGHLIGHTS
The Sales and Other Income of the Company for the Financial Year
2022-23 stood at Rs. 26,364.42 Lakhs as against Rs. 24,832.22 Lakhs of last year.
Profit/(Loss) after tax stood at Rs.
1,407.32 Lakhs as against Rs. I, I I8.05 Lakhs of last year.
The Companys financial statements have been prepared in
accordance with the Indian Accounting Standards (Ind AS), complying with the requirements
of the Companys Act 201 3 and the guidelines issued by Securities and Exchange Board
of India (SEBI).
CAUTIONARY STATEMENT
Statements in this Annual Report, particularly those that relate to
Management Discussion and Analysis, describing the Companys objectives,
projections,estimates and expectations, may constitute ‘forward-looking
statements within the meaning of applicable laws and regulations. Although the
expectations are based on reasonable assumptions, the actual results might differ.
KEY FINANCIAL RATIOS
The key financial ratios for the financial year 2022-23 and a
comparison thereof with the financial year 2021 -22 have been stated in the financial
statement for the period ended March 31,2023.
Additional information pursuant to Regulations 52 (4) of Securities and
Exchange Board of India (Listing obligation and disclosure requirements) Regulations 2015,
as amended.
| Sr No. |
Particulars |
Standalone
Year Ended |
Consolidated
Year Ended |
|
|
|
|
31.03.2023 |
31.03.2022 |
31.03.2023 |
31.03.2022 |
| 1 |
Debt-Equity Ratio (In
times) |
|
|
|
|
|
Non -Current Borrowing +
Current Borrowing / Total Equity |
0.24 |
0.20 |
0.24 |
0.20 |
| 2 |
Debt Service Coverage
Ratio (In times) |
|
|
|
|
|
Profit before tax+ Interest
on loan / Interest on loan + Principal repayments made during the period for longterm loan |
5.87 |
2.33 |
5.57 |
2.33 |
| 3 |
Interest Service Coverage
Ratio (In times) |
7.22 |
3.14 |
6.84 |
3.14 |
|
Profit before tax+ Interest
on loan / Interest on loan |
|
|
|
|
| 4 |
Current Ratio (In times) |
1.63 |
1.80 |
1.62 |
1.80 |
|
Current Assets / Current
Liabilities |
|
|
|
|
| 5 |
Long Term Debt to Working
Capital Ratio (In times) |
0.04 |
0.01 |
0.04 |
0.01 |
|
Non current borrowings / Current
Assets - Current Liabilities |
|
|
|
|
| 6 |
Bad Debts to Account
Receivable Ratio (In times) |
0.00 |
0.14 |
0.00 |
0.14 |
|
Bad Debts / Trade Receivables |
|
|
|
|
| 7 |
Current Liability Ratio
(In times) |
0.41 |
0.95 |
0.42 |
0.95 |
|
Current Liabilities / Total
Liabilities |
|
|
|
|
| 8 |
Total Debts to Total
Assets (In times) |
0.13 |
0.1 1 |
0.13 |
0.1 1 |
|
Total Borrowings (Current +
Non Current) / Total Assets |
|
|
|
|
| 9 |
Debtors Turnover (In
times) |
6.28 |
6.69 |
6.29 |
6.69 |
|
Revenue From Operations /
Average Trade Receivables |
|
|
|
|
| 10 |
InventoryTurnover (In
times) |
2.20 |
2.24 |
2.19 |
2.24 |
|
Cost of Goods Sold (Raw
Material and Components Consumed + Purchase of Stock in Trade + Change in Inventories +
Mfg. expenses) / Average Inventories of Finished Goods, Semi Finished Goods, Stock in
Trade, Stores Cutting Tools and Raw Material and Components |
|
|
|
|
| 1 1 |
Operating Margin (%) |
0.05 |
5.90 |
0.05 |
5.90 |
|
Earnings Before Interest and
Tax Less Other Income / Revenue From Operations |
|
|
|
|
| 12 |
Net Profit Margin (%) |
0.06 |
4.50 |
0.05 |
4.50 |
|
Profit After Tax / Total Income |
|
|
|
|
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