Emkay Taps & Cutting Tools Ltd Management Discussions

Global Growth-: The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies-where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025-will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now-at 3.1 percent-is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. Core inflation is generally projected to decline more gradually.

Global growth, estimated at 3.1 percent in 2023, is projected to remain at 3.1 percent in 2024 before rising modestly to 3.2 percent in 2025. Compared with that in the October 2023, the forecast for 2024 is about 0.2 percentage point higher, reflecting upgrades for China, the United States, and large emerging market and developing economies. Nevertheless, the projection for global growth in 2024 and 2025 is below the historical (2000-19) annual average of 3.8 percent, reflecting restrictive monetary policies and withdrawal of fiscal support, as well as low underlying productivity growth. Advanced economies are expected to see growth decline slightly in 2024 before rising in 2025, with a recovery in the euro area from low growth in 2023 and a moderate growth in the United States. Emerging markets and developing economies are expected to experience stable growth through 2024 and 2025, with regional differences.

World trade growth is projected at 3.3 percent in 2024 and 3.6 percent in 2025, below its historical average growth rate of 4.9 percent. Rising trade distortions and geo-economics fragmentation are expected to continue to weigh on the level of global trade. Countries imposed about 3,200 new restrictions on trade in 2022 and about 3,000 in 2023, up from about 1,100 in 2019, according to Global Trade Alert data.

Inflation outlook declining at Different Speeds: Global headline inflation is expected to fall from an annual average of 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025 A more front-loaded decline is expected for advanced economies, with inflation falling by 2.0 percentage points in 2024, while it declines in 2025 only in emerging market and developing economies.

The fall in global inflation in 2024 reflects a broad-based decline in global core inflation. This dynamic differs from that in 2023, when global core inflation fell a little on an annual average basis and headline inflation declined mainly on account of lower fuel and food price inflation. In 2024, core inflation is expected to fall by 1.2 percentage points after contracting by just 0.2 percentage point in 2023. As is the case for headline inflation, the fall in core inflationist faster for advanced economies. The drivers of declining core inflation differ by country but include the effects of still-tight monetary policies, a related softening in labour markets, and fading pass-through effects from earlier declines in relative prices, notably in that of energy.

Risks to the Outlook: Risks to the global economic landscape have diminished since October 2023, leading to a broadly balanced distribution of possible outcomes around the baseline projection for global growth, from a clear downside tilt in the April 2023 WEO and the October 2023 WEO. With inflationary pressures abating more swiftly than expected in many countries, risks to the inflation outlook are now also broadly balanced. Overall, there is scope for further favourable surprises, but numerous adverse risks pull the distribution of outcomes in the opposite direction. Prominent risks and uncertainties surrounding the outlook are now discussed, and a model-based analysis that quantifies risks to the global outlook and plausible scenarios.

Upside risks

More favourable outcomes for the global economy than expected could arise from several sources:

Short-term fiscal boost in the context of elections: Many countries are expected to elect their national governments in 2024 a "Great Election Year". In this context, policymakers may postpone fiscal adjustment or commit to new expansionary measures. Studies suggest that fiscal deficits typically rise during elections and that governments do not tend to unwind the increases thereafter (Brender and Drazen 2007; Dubois 2016; de Haan, Ohnsorge, and Yu 2023; Chapter 1 of the April 2024 Fiscal Monitor). In the near term, new expansionary measures such as tax cuts, increased fiscal transfers, and infrastructure investment could boost economic activity, especially in economies in which sovereign risk is perceived as low, and raise global growth above current projections. However, such fiscal expansions could add to inflationary pressures-especially in countries with overheated economies and steep inflation-unemployment trade-offs-and result in higher interest rates, which would increase the challenge of curbing debt. A more disruptive policy adjustment could follow, with a negative impact on growth.

Further supply-side surprises, allowing for faster monetary policy easing: Downside surprises to core inflation on account of a faster-than-expected fading of pass-through effects from past relative price shocks and the easing of global supply constraints are plausible in several cases. A faster-than-envisaged compression of profit margins to absorb past cost increases is also plausible. In the United States, for example, where the labour market remains especially tight, a stronger-than-expected downward shift toward the pre-pandemic ratio of vacancies to unemployed persons could ease labour market conditions and alleviate underlying inflationary pressures. Such developments could lead to a greater-than-expected decline in inflation expectations and allow central banks to bring forward their policy-easing plans, which would reduce borrowing costs, raise consumer confidence, and reinforce global growth.

Spurs to productivity from artificial intelligence:

Recent advances in artificial intelligence, notably the emergence of large language models and of generative pertained transformers, have marked a leap in the ability of technology to outperform humans in several cognitive areas. At the same time, as during the introduction of past general-purpose technologies, the impact of artificial intelligence on economic outcomes, as well as its timing, remains highly uncertain. In the near term, the rollout of artificial intelligence could boost investment in some cases, with firms allocating more resources to integrate innovative tools and refine production processes. IMF staff analysis suggests that over the medium term, artificial intelligence could raise worker productivity and incomes and contribute to growth but also cause job displacement and inequality (Cazzaniga and others 2024). Advanced economies stand to benefit from artificial intelligence sooner than emerging market and developing economies, given the greater emphasis on cognitive-intensiveroles in the employment structures of the former. In advanced economies, artificial intelligence could affect about 60 percent of workers, with about half of those exposed achieving higher productivity and earning higher incomes and half seeing lower demand for their labour and lower wages. Artificial intelligence could affect about 40 percent of jobs in emerging market economies and 26 percent of jobs in low-income countries, implying a smaller near-term labour market disruption and less scope for related productivity improvements in economies in those two groups.

Structural reform momentum gathering:

Faster-than-expected implementation of macro structural reforms could boost productivity growth and contribute to higher medium-term growth than in baseline forecasts, helping to heal some of the "scarring" output losses from the pandemic Reforms aimed at increasing labour participation, reducing resource misallocation, and improving the allocation of talent could revive economic activity and reverse the past two decades of slower global growth, in emerging market and developing economies with constrained policy environments, faster progress on implementing supply-enhancing reforms including those in the areas of governance, business regulation, and external sector policies-could spark greater-than-expected domestic and foreign investment and growth (Budina and others 2023).Stepped-up efforts to narrow gaps in labour market participation by gender-beyond present policy trends-would amplify the returns of such reforms (Badel and Goyal 2023).

Downside risks

Despite the surprisingly resilient global economic performance since October 2023, several adverse risks to global growth remain plausible New commodity price spikes amid regional conflicts: The conflict in Gaza and Israel could escalate further into the wider region. Continued attacks in the Red Sea and the ongoing war in Ukraine risk generating additional supply shocks adverse to the global recovery, with spikes in food, energy, and transportation costs. Further geopolitical tensions--including a possible reescalation of the war in Ukraine--could also constrain cross-border flows of food, fuel, and fertilizer, causing additional price volatility and undermining business and consumer sentiment such geopolitical shocks could complicate the ongoing disinflation process and delay central bank policy easing, with negative effects on global economic growth. Overall, such adverse supply shocks may affect countries asymmetrically, with particularly acute effects on lower-income countries where food and energy constitute a large share of household expenditure.

Persistent inflation and financial stress:

A slower-than-expected decline in core inflation in major economies as a result, for example, of persistent labour market tightness or renewed tensions in supply chains could trigger a rise in interest rate expectations and a fall in asset prices, as in early 2023. Furthermore, as Chapter 2 explains, the risk that the cooling effects of past monetary tightening are yet to come is plausible, especially where fixed-rate mortgages are resetting and household debt is high. Such developments could increase defaults in many sectors-notably including commercial real estate and firms-and raise risks to financial stability (see Chapter 1 of the April 2024 Global Financial Stability Report). They could also trigger flight-to-safety capital flows, tighten global financial conditions, and strengthen the US dollar and so reduce global growth.

Chinas recovery faltering:

In the absence of a comprehensive restructuring policy package for the troubled property sector in China, a larger and more prolonged drop in real estate investment could occur, accompanied by expectations of future house prices declining, reduced housing demand, and a further weakening in household confidence and spending, with implications for global growth. Unintended fiscal tightening on account of local government financing constraints could amplify the impact. In such a scenario, the slowdown in domestic demand could cause disinflationary pressures to intensify, resulting in sustained low inflation or deflation. Spill overs to Chinas trading partners in such a scenario are estimated to be, on balance, negative, with effects through weaker demand for trading-partner products outweighing gains from lower commodity prices; global current account imbalances may increase as a result. The authorities policy responses could significantly mitigate the economic costs of such developments if they include accelerating the exit of nonviable property developers, promoting the completion of housing projects, and resolving the debt risks of local governments. Additional monetary policy easing, especially through lower interest rates, as well as expansionary fiscal measures--including funding of unfinished housing and support to vulnerable households--could further support demand and ward off deflationary risks.

Disruptive fiscal adjustment and debt distress:

Fiscal consolidation is necessary in many advanced and emerging market and developing economies to curb debt-to-GDP ratios and rebuild capacity for weathering future shocks. But an excessively sharp shift to tax hikes and spending cuts, beyond what is currently envisaged, could result in slower-than-expected growth and reduce reform momentum. Countries that lack a credible medium-term consolidation plan could face adverse market reactions or increased risks of debt distress that force harsh adjustment.

Distrust of government eroding reform momentum:

Across broad income groups, confidence in government, legislative bodies, and political parties is below 50 percent, by some measures Low confidence in governments and institutions, amid political polarization in some cases, could support for structural reforms, complicate the adoption of and adaptation to technological advances, create resistance to raising the revenue needed to finance necessary investments, and in some cases increase the risk of social unrest.

Geo economic fragmentation intensifying:

The separation of the world economy into blocs amid Russias war in Ukraine and other geopolitical tensions could accelerate. Such a development could generate more restrictions on trade and cross-border movements of capital, technology, and workers and could hamper international cooperation. IMF research suggests that intensified geo economic fragmentation could reduce portfolio and foreign direct investment flows, slow the pace of innovation and technology adoption, and constrain the flow of commodities across fragmented blocs, resulting in large output losses and commodity price volatility.

In the context of upcoming election in numerous countries, moves to raise barriers to the international flow of workers could reverse the supply-side gains of recent years, exacerbate labour market tightness and skill shortages, and raise inflationary pressures. Tariff increases could trigger retaliatory responses, raise costs, and harm both business profitability and consumer well-being.

Source: https://www.imf.org- World Economic outlook

Current State of the Economy

GDP growth is projected at 7.8% in FY 2023-24 and around 6? per cent in each of the following two fiscal years. Domestic demand will be driven by gross capital formation, particularly in the public sector, with private consumption growth remaining sluggish. Exports will continue to grow, especially of services such as information technology and consulting where India will continue to increase its global market share, supported by foreign investment. Headline inflation will decline gradually, although uncertainty about food inflation remains elevated.

Monetary policy easing is projected to start in the second half of the year once lower inflation is maintained. The 2024 Interim Union Budget aims for consolidation, setting a fiscal deficit target at 5.1% of GDP for FY 2024-25. Fiscal support should remain targeted towards vulnerable households. Rising debt limits fiscal space and increases the need to tackle structural problems in order to make growth fairer and more sustainable. Returns from reforms could be significant in agriculture, which accounts for the largest share of employment and, due to low productivity and still widespread poverty, absorbs considerable public subsidies.

Public investment has boosted aggregate demand

Growth was stronger than expected in the second half of FY 2023-24, driven by strong public investment in transport and energy infrastructure, as well as exports of services. Private real estate demand is also strong. On the other hand, private consumption has been less vigorous, confirming the preliminary findings from a new household consumption expenditure survey. Some high-frequency indicators, including on E-way bills, toll collections, and new vehicle and scooter sales are suggesting increasing activity. Other indicators, such as digital payment transactions and cement output, remain relatively flat. In urban areas, conditions on the labour market have become more favourable for job seekers, but in rural areas demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has lost steam, although it remains at high levels. The tighter monetary policy stance and tight liquidity have helped to anchor inflation expectations, despite recurrent supply-side shocks. Headline inflation eased to 4.9% in March 2024, helped by lower import price growth and softer input prices, and core inflation stood at 3.2%. The stock exchange has reached new highs recently, with related capital gains supporting discretionary consumption. The growth of bank credit to industry slowed to 7.8% in January 2024 Monetary policy will start loosening and fiscal consolidation remains a priority The Reserve Bank of India (RBI) remains committed to the objective of achieving the medium-term target for CPI inflation of 4% within a band of +/- 2%, while supporting growth. Assuming a normal monsoon season and no other supply shocks that may de-anchor inflation expectations, a first cut of the policy rate is projected in late 2024, with cumulative cuts of up to 125 basis points implemented before March 2026. The RBI will only switch the stance to neutral during 2025.

The FY 2024-25 budget is projected to meet the Interim Budgets ambitious Union deficit target of 5.1% of GDP, mostly through continuing improvement in tax collection (at largely unchanged rates) and, to a lesser extent, lower outlays for defence and transportation. A full-year budget will be presented after the April-June general election, providing a detailed statement of the new governments strategy. Reducing government indebtedness will require a combination of increased revenues, improved spending efficiency and stronger fiscal rules. Renewed consideration should be given to divestiture of government assets, including of public banks and utilities.

Risks are balanced

In FY 2024-25, Indias GDP growth will slow to 6.6%. Fiscal consolidation, while necessary, will weigh on public investment, and be offset only partially by stronger private investment as business confidence improves. Household consumption (in particular, consumers discretionary demand) is not expected to accelerate, amid disappointing job creation, lukewarm rural performance, and still tight financial conditions. Stronger external demand will bring an improvement in export growth. GDP growth will remain in line with the 20-year average in FY 2025-26.

Risks are balanced. On the downside, they include new supply chain disruptions generated by geopolitical turmoil, food inflation stickiness due to extreme weather episodes, and negative spill overs from fluctuations in global financial markets. On the upside, growth may be faster than projected if ongoing disinflation strengthens consumers purchasing power, boosting household consumption, business investment and job creation.

Fiscal consolidation should be accompanied by reforms, including in agriculture

India needs to achieve a higher level of real GDP growth to address the countrys multiple development challenges, especially job creation. Fiscal consolidation is appropriate in the current context given the high level of public debt, which holds back private investment. Fiscal consolidation requires a prioritisation of expenditures on infrastructure, including schools and hospitals, climate risk mitigation and digitalisation. Removing market distortions is another key requirement to facilitate resource allocation and foster stronger, more sustainable and inclusive growth, including in agriculture. The sector employs 44% the workforce and accounts for 56% of non-energy CO2 emissions, but only for around 15% of GDP. Agricultural yields are sub-par and incomes low. Moreover, fertiliser and food subsidies represent a fifth of the overall government budget. To ensure further progress, unpredictable export restraints and tax surcharges should be avoided, subsidies for fertilisers and pesticides reduced, and minimum price supports rationalised (accompanied by a shift to direct payments for non-staple crops). In addition, requirements to sell produce in mandis (state-regulated wholesale markets) should be relaxed. Such bold actions must be accompanied by pro-active communication, open dialogue with stakeholders and regulatory safeguards.

Source:OECD ECONOMIC OUTLOOK, VOLUME 2024 ISSUE 1 ? OECD 2024

Our industry is mainly dependent on automobile and auto ancillary industries and other engineering industries however due to privatisation of defence and addition of new customer base to our existing customer base our growth is consequently linked to the future of these industries which is bright as of now. Brief outlook of Automobile industry and Auto component industry,Electrical and fittings, Defence and Aerospace industry (Engineering and Capital Goods Industry)together representing "Our Industry",forms part of this report under "Outlook of Industry".

Outlook of Industry

In light of the humanitarian crisis and the need to tackle climate change which present tossup scenario for the overall economy, we are optimistic that the "Our Industry" in India will continue to do well to have sustained performance in years to come. We are optimistic that the "Our Industry" in India will continue to do well to have sustained performance in years to come.

The Indian passenger car market was valued at US$ 32.70 billion in 2021, and it is expected to reach a value of US$ 54.84 billion by 2027 while registering a CAGR of over 9% between the periods of 2022-27 India has a strong market in terms of domestic demand and exports. In January 2024, the total passenger vehicle sales reached 3, 93,074. Passenger Vehicles saw the highest ever sales in the month of January posting a growth of 14% compared to January 2023. This is because India has significant cost advantages, as automobile firms save 10-25% on operations vis-a-vis Europe and Latin America. The Indian automotive industry is targeting to increase the export of vehicles by five times during 2016-26. In FY23, total automobile exports from India stood at 47, 61,487. This sectors share of the national GDP increased from 2.77% in 1992-1993 to around 7.1% presently. It employs about 19 million people directly and indirectly In January 2024, the total production of passenger vehicles*, 3W, 2W, and quadricycles was 2.32 million units. In April-January FY24, the total production of passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles was 23.36 million units.

In the third quarter of 2023-24, total production of passenger vehicles*, commercial vehicles**, three wheelers, two wheelers, and quadricycles was 7.13 million units.

India has ample growth potential for the automobile industry considering that the car ownership in India lags significantly behind developed regions like the US, China, and Europe, where 80-90% of the population owns a car, compared to only around 8% in India. Foreign companies such as Kia Motors and Volkswagen have adapted themselves to cater to the large Indian middle-class population by dropping their traditional structure and designs. This has allowed them to compete directly with domestic firms, making the sector highly competitive.

There have been plenty of investments in the automobile sector recently, as the Government of India expects the automobile sector to attract US$ 8-10 billion in local and foreign investments by 2023. The automobile sector received a cumulative equity FDI inflow of about US$ 35.65 billion betweenApril 2000 December 2023. Source: https://www.ibef.org/industry/automobiles-presentation

Industry turnover stood at Rs. 2.9 lakh crore (US$ 36.1 billion) in H1 2023-24 the industry had revenue growth of 12.6% as compared to H1 2022-23. Domestic OEM supplies contributed ~66% to the industrys turnover, followed by domestic aftermarket (~12%) and exports (~22.3%), in FY23. The component sales to OEMs in the domestic market grew by 13.9% to US$ 30.57 billion (Rs. 2.54 lakh crore). In H1 2023-24, exports of auto components grew by 2.7% to Rs. 85,870 crore (US$ 10.4 billion). The aftermarket for auto components grew by 7.5% in H1 2023-24 reaching Rs. 45,158 crore (US$ 5.5 billion).

As per the Automobile Component Manufacturers Association (ACMA) forecast, auto component exports from India are expected to reach US$ 30 billion by 2026. The auto component industry is projected to record US$ 200 billion in revenue by 2026. Strong international demand and resurgence in the local original equipment and aftermarket segments are predicted to help the auto component industry grow 20-23% in FY22.

Source:https://www.ibef.org/industry/autocomponents-india

The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to Indias economy.Demand in the engineering industry segment is driven by investments and capacity creation in core sectors like power, infrastructure developments, mining, oil and other sectors like the general manufacturing sector, automotive and process industries, and consumer goods industry. To enhance opportunities for private investment in infrastructure - Infrastructure Finance Secretariat is being established who will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure and power.

Engineering Industry comprises of two major segments viz., Heavy engineering and light engineering. Machine tools forms vital part of heavy engineering segment. The IMARC Group expects the machine tools market to reach US$ 2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28. The market is expected to reach US$ 2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28. The manufacturers of machine tools are mostly SMEs, few of them are mid-sized manufacturers which have an annual turnover varying between US$ 36-60 million (Rs. 300-500 crore).The types of machine tools currently manufactured are general/special purpose machines, standard Computer Numerical Control (CNC) machines, gear cutting, grinding, medium size machines, electrical discharge machining (EDM), presses, press brakes, pipe bending, rolling, bending machines, etc.

The Ministry of Heavy Industries (MHI) launched two Production Linked Incentive (PLI) Schemes, namely PLI Scheme for Automobile and Auto Component Industry, and PLI Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage. The PLI Scheme for the automobile and auto components industry has been launched with a total budgetary outlay of Rs. 25,938 crore (US$ 3.17 billion) for a period of five years (FY23 to FY27).Source: https://www.ibef.org/industry/indian-engineering-industry-analysis-presentation

In 2023., the aerospace and defense (A&D) Industry witnessed a revival in product demand In the aerospace sector domestic commercialization passenger kilometers surpassed prepandemic levels in most countries this surge in air travel led to increase demand for new aircraft and aftermarket products and services. In the US defense sector, new geopolitical challenges, along with the prioritization of modernizing the military driverobust demand in 2023 particularly for weapons and next-generation capabilities The demand for A&D products and services is expected to continue into 2024. On the commercial side, travel is likely to continue its upward trajectory. In the defense segment, demand for products is expected to continue to increase as geopolitical instability grows. Furthermore, companies in emerging markets, such as advanced air mobility, are expected to advance testing and certification as they prepare for commercialization.

While these trends are likely to drive both domestic and international spending, the increased demand may cause A&D companies to deal with new challenges as they grapple with ongoing ones such as supply chain issues, longer lead times, and a talent shortage. To address these challenges, A&D companies may further embrace digitalization and adopt emerging, advanced technologies and, thus, could achieve profitability by both addressing their cost challenges and initiating the development of novel revenue streams. Such technologies may be foundational for A&D companies in creating a more resilient supply chain, mitigating logistical issues, attracting new talent, and rapidly creating new products.

As A&D companies prepare for the year ahead, there are some key trends they may consider focusing on to take on the challenges and capitalize on emerging opportunities, with digitalization being the unifying theme across the trends: Source: https://www2.deloitte.com/us/en/insights/industry/aerospace-defense/aerospace-and-defense-industry-outlook.html

The company has sufficient capacity and is looking out for export orders from USA, Turkey etc. Other than export orders we are also concentrating on local markets. Overall growth depends on how the economy progresses in the scenario explained above.

Nevertheless, the Company is now more focused on getting customers who are looking for application and taps with special geometrics, where the prices are good. Towards this objective, the Company participated in ACMEE Chennai, Trade centre Chennai from 15 to 19 June 2023 and will be participating in IMTEX 2025 at Bangalore city from 23 to 29 January 2025. Along with increasing customer base, the Company is also adding new products and improving levels of finished goods inventory to provide better services to our existing customers.

Your Board of Directors in their meeting held on June 29, 2023 has approved the Scheme of Arrangement between Emkay Taps and Cutting Tools Limited ("the Demerged Company") and Emkay Tools Limited ("Resulting Company") and their respective Shareholders and Creditors under Sections 230 to 232 read with Section 66 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 2013 and rules and regulations framed thereunder. An application under Regulation 37 of the SEBI (LODR) Regulations, 2015 for the proposed Scheme of Arrangement has been submitted to National Stock Exchange of India Limited ("NSE" or "the Stock Exchange") and Securities Exchange Board of India (SEBI) through the Stock Exchange for obtaining their Observation Letter(s) (NOC) to file the Scheme for seeking approval of NCLT.

The growth of global OEM sourcing from India and the increased indigenization of global OEMs is turning the country into a preferable designing and manufacturing base. India is expected to become the fourth largest automobiles producer globally by 2024 after China, US and Japan. Growing working population, rapid urbanization, boost in rural economy and rising middle class income are expected to remain key demand drivers. Other areas of opportunities explained above like electrical fittings, defense sector, aerospace, etc., are all growing very fast in India and we expect full benefits of growth from these sectors also.

Since auto sector is still our main market any down fall in the auto sector is likely to affect our industry. Also imports of cutting tools from China may pose a threat in some segments of our industry. The threat is medium, given the concentration of industry clusters in specific strategic centers. However, now the Automobile industry wants proper services at local levels and materials are required just in time. We therefore have to keep specific inventories for different customers and have to supply to them immediately on the same day when we get the order. Because of superior quality and prompt services we shall be able to overcome threats from imported tools in the years to come

The Company is exposed to external and internal risks associated with the business. The operations of the Company are directly dependent on the Automotive Industry and the cyclical nature of the industry affects us. General Economic conditions impact the automotive industry and in turn our operations as well. The Company is exposed to strong competitive pressures, both domestic and overseas. Companys established reputation, close customer relationships, ability to provide higher level of engineering design support and relentless drive for improvement gives us a competitive edge. We are fully aware of risks and a systematic risk identification and mitigation framework is in place to ensure that a suitable action plan is drawn up to mitigate the same. The Company has virtually no control over external risks such as a general down turn in the economy, new regulations, government policies and interest rates.

Considering the size and nature of the business, presently adequate internal control systems are in place. However, as and when company achieves further growth and higher level of operations, company will review the internal control system to match with changed requirement.

The company has proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against unauthorized use or disposition and that transaction are authorized and recorded correctly. The company has constituted Audit Committee consisting of non-executive and independent Directors to look into various aspects of Accounts. The company has a clearly defined organization structure in place.

Discussion on Financial Performance with Respect To Operational Performance

Gross Revenue from main business operations was INR 10345.13 lakh as recorded in the previous financial year 2023-24 with an increase of 16.74% as against the preceding year, reinforcing the Companys growth momentum.

Another noteworthy point is that the export sales of the Company in the year 2023-24 have almost doubled to 669.79 lakh as against the 331.98 lakh of 2022-23. The export sales are expected to see a further rise in the years to come.

The company has earned Profit before depreciation, Interest and Taxes (PBDIT) of INR 9291.65 lakh during the financial year under review as against the previous financial years PBDIT of INR 5987.67 lakh. The profit after tax for the financial Year 2023-24 was INR 7189.87 lakhs as against profit after tax of INR 4412.78 lakhs for the financial year 2022-23.

The basic and diluted EPS on INR 10/- paid up share are INR 67.38 and INR 67.38 respectively for the financial year ended March 31, 2024. The basic and diluted EPS on INR 10/- paid up share is INR 41.35 and INR 41.35 respectively for financial year ended March 31, 2023.

The Reserves and Surplus of the Company as on March 31, 2024 stood at INR 28823.56 lakh as against INR 21525 lakh as on March 31, 2023.

As on March 31, 2024 the Net worth of the company stands at INR 29890.69 lakh as against INR 22,592.13 lakh in the financial year 2022-23.

Operating profit margin from manufacturing activities has remained consistent with last year operating profit margin. However the Net Profit Margin has changed due to gain from other income.

Segment Wise or Product Wise Performance

The company has only two reportable segments viz. Engineering Tools and Power on Consolidation basis. Detailed reporting along with figures relating to each reportable segment is disclosed as a part of the notes to the accounts in Note no. 37.

The company believes that human resources will play a key role in its future growth. Planned efforts are made to develop and retain talent. Learning and development initiatives focus on developing the professional capabilities. The company continues to provide growth opportunities to internal talent by assigning them higher responsibilities with suitable exposure and training. The company continues to maintain positive work environment and constructive relationship with its employees with a continuing focus on productivity and efficiency.

Cautionary statement

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be forward looking statements. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, amongst others, economic conditions affecting demand/supply and price conditions in the markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.