Gala Precision Engineering Ltd Management Discussions

Global Economic Overview

The reported year witnessed the global economy grappling with various macroeconomic challenges. Despite a tumultuous CY 2023, marked by persistent geopolitical turmoil triggering volatility in energy and food markets and inflation, the global economy showcased remarkable resilience, and expected to increase at CAGR of 5.1% from CY23 to CY28. India is expected to maintain the highest growth rate, with a CAGR of 9.8% between CY23 to CY28. This fueled with other government initiatives like Make in India, Production Linked Incentive (PLI) scheme & others will boost the domestic manufacturing industry. Central banks in major economies resorted to calibrated interest rate hikes to curb inflation. While the strategic monetary policies slowed the global economy, it also aided in avoiding an economic downturn.

The United States, fuelled by robust consumer and government spending and a resurgence in international trade, achieved a growth rate of 2.5%. In contrast, the European Union and the Euro area experienced slower growth rates of 0.8% and 0.9% respectively, as internal policies and external geopolitical risks tempered their economic momentum.

On the other hand, while emerging markets such as India, Vietnam and Mexico experienced positive growth trajectories, China recorded a sluggish growth rate. Owing to gradual recovery from real estate sector challenges, subdued consumer confidence and demographic challenges, China recorded a growth of 5.2%. emerging markets demonstrated commendable growth, supported by diversified economic strategies and foreign investments. Simultaneously, the global economy also drew strength from a resilient labour market, service-driven expansion, strong household and corporate balance sheets and strategic fiscal interventions. Notably, global inflation eased due to declining energy prices and reduced labour shortages, averting a wage- price spiral despite significant banking stress and rapid policy tightening.

The global & Indian economy is poised for strong growth in the next 5 years

> HIGH DEMAND FOR DISC & STRIP SPRINGS (DSS) AND WEDGE LOCK WASHERS (WLW) IN INDUSTRIALS WILL LEAD THE MARKET GROWTH FOR DSS & WLW:

The global DSS & WLW market was valued at US$ 891M in CY23 and is projected to grow at a CAGR of 6.1% during CY23-26. The Indian DSS & WLW market is showing the similar growth trajectory and is expected to register a CAGR of 6.6% during FY24-27, with the market value in FY24 being US$ 115M. Industrial sector compromising of heavy machinery like equipments used in manufacturing, infrastructure & others, contribute the maximum revenue share in the DSS & WLW market. The growth is largely accreditable to the increase in steel demand to fulfill the growing urbanization & construction needs. After industrial, mobility sector consisting of automobiles (such as four-wheelers and two-wheelers) & railways is the biggest contributor to the revenue of DSS & WLW. In automobile sector, demand is fueled by the growing consumption of passenger cars in countries like India & Brazil. The renewable energy sector comprising of wind & hydro energy is another key growing market. Here, the focus on government policies to mitigate international climate change will boost growth.

> THE COIL & SPIRAL SPRINGS (CSS) MARKET WILL WITNESS GROWTH DUE TO THE SURGE IN DEMAND OF EV VEHICLES IN INDIA:

Reflecting 1 Lattices expert analysis, the Indian market for CSS was valued at ~US$ 459M in FY24 and is expected to grow at a CAGR of 9.8% during FY24-27. The market growth is credited to factors like growing automobile industry & rapid urbanization.

The major consumption of CSS happens in the mobility largely applied in the commercial vehicles, automobiles & railways. Coil springs are used in EVs to reduce the overall vehicle weight. Penetration of EVs in the 2-wheeler market stands at ~5% and in 4-wheeler market is ~2% as of FY24 in India. This growing penetration will largely increase the demand. After mobility, the major consumption happens in the industrial sector. Here, the focus on Indian government to develop Indias industrial participation through schemes like PLI, Urban Infrastructure Development scheme is boosting growth.

> AGEING OF INFRASTRUCTURE & GROWTH IN RENEWABLE ENERGY MARKET WILL LEAD TO HIGH DEMAND FOR SPECIAL FASTENERS (SFS):

As per Universal Consulting report on "Shortlisting Attractive Global Opportunities: Fasteners", the global market for SFS was valued at ~US$ 97,326M in CY23 and is expected to grow at a CAGR of 6.7% during CY23-26. The Indian market for SFS was valued at ~US$ 6,580M in FY24 and is expected to grow at a CAGR of 18.0% between FY24-27.

This strong growth in the market can be attributed to different factors like growth in the renewable energy industry & ageing of infrastructure. Globally, most of the revenue is currently contributed by the mobility sector in which demand is majorly in the automobile sector. The industrial sector contributes almost equivalent revenue to the mobility sector, in which the majority of demand comes from heavy machinery. The policy support from different countries focusing on development of clean energy is a key growth driver for the renewable energy sector.

REAL GDP GROWTH (ANNUAL PERCENT CHANGE)

The global GDP is expected to rise at a CAGR of 5.1% from CY23-28, having grown at a CAGR of 3.3% from CY18-23. The global economy has rebounded after the historic economic downturn caused by the COVID- 19 pandemic.

Outlook

After a significant decline in CY20, recovery was driven by extended fiscal support, adaptation to new work patterns, and vaccine distribution. Global GDP is forecasted to grow at the rate of 3.2% in CY24, slightly lower than expected due to the geopolitical crisis of the Russia-Ukraine war. GDP further growth is projected to average 5.1% from CY23 to CY28. In comparison, India is expected to maintain the highest growth rate, with its current Y-o-Y growth rate standing at 6.3% in CY23 and projected to grow at 6.3% by CY28.

GERMANY IS EXPECTED TO GROW AT A CAGR OF 4.3% FROM CY23-28P; OVER THE SAME PERIOD CHINA AND ITALY ARE EXPECTED TO GROW AT A CAGR OF 5.9% AND 3.3% RESPECTIVELY

China is leading among all the developing economies and is expected to become the top economic power by CY50. Chinas current GDP is US$ 17,701 B and is expected to be US$ 23,609B by CY28, growing at a CAGR of 5.9% over CY23-28.

Outlook

Due to its globally acclaimed engineering sector and superior quality exports, Germanys GDP is expected to reach US$ 5,459B in CY28, growing at a CAGR of 4.3% over CY23-28. Italy, known for its significant contributions to global fashion, automotive industries, and tourism, is expected to reach a GDP of ~US$ 2,571 B, growing at a CAGR of 3.3% over CY23-28.

GLOBAL GDP PER CAPITA IS EXPECTED TO INCREASE AT A CAGR OF 4.1% FROM CY23 TO CY28 GDP Per capita growth

(US$ , CY18-28P)

Outlook

The International Monetary Fund (IMF) projects that global GDP per capita will grow at an average rate of 4.1% annually from CY23-28. This rise can be attributed to several key factors, including technological innovation, globalization, and increased educational attainment. China stands out as one of the fastest- growing economies globally, with a rapidly increasing GDP per capita. The IMF forecasts an average CAGR of 6.0% per year for China between CY23 and CY28P. This growth is primarily driven by Chinas substantial investment in infrastructure, education, and research and development. The IMF predicts Italys and Germanys GDP per capita to grow at an average rate of3.2% during the same period.

INFLATION RATE, AVERAGE CONSUMER PRICES (ANNUAL % CHANGE)

Global inflation has reached a peak of 8.7% in CY22 and is expected to eventually normalize to 3.8% in CY28 Global inflation is forecasted to decline steadily, from 8.7% in CY22 to 6.9% in CY23 and 5.8% in CY24, due to tighter monetary policy aided by lower international commodity prices. Core inflation is generally projected to decline more gradually. Although inflation has been high in many countries, it is projected to decrease, with an average global inflation rate of 3.8% in CY28.

Indian Economic Overview

In FY 2023-24, the Indian economy exhibited robust growth, achieving a GDP expansion of 8.2%. This performance positions India as the fastest-growing major economy globally, surpassing the growth rate observed in the previous fiscal year. A significant contributor to this growth was the substantial increase in capital expenditure, rising from Rs10.5 lakh crore in FY23 to Rs12.7 lakh crore in FY244. This further stimulated private investment and widespread economic activity.

India is the fifth largest economy in CY23 and is expected to be the third largest by CY30. Indias GDP (at current prices) grew from US$ 2,651 B to US$ 3,732B between CY17 and CY23. The increase can be attributed to the robust reforms like GST, corporate tax revision, revised FDI limit, and growth across sectors.

TREND IN CAPITAL EXPENDITURE

The governments prudent fiscal management and well-calibrated monetary policies played a pivotal role in effectively managing inflationary pressures. With the decline in inflation, economic activities steadily improved. Additionally, the strategic initiatives undertaken by the Government of India bolstered consumer confidence and created a favourable environment for sustained economic expansion.

Furthermore, the economy benefited from robust domestic demand, driven primarily by private consumption, and strong performance in both the services and manufacturing sectors. Key economic indicators such as credit growth, GST collections and a consistently strong manufacturing PMI, further validate the economys dynamism and potential for continued growth and stability.

Russia-Ukraine war in CY22 has led to Geopolitical crisis creating energy and food supply distribution and thus led to an unprecedented rise in prices. In India, inflation has become stable, this positive trend is backed by the Consumer Price Index (CPI), which decreased to 5.5% in CY23, down from 6.7% in CY22. The Indian government and the Reserve Bank of India (RBI) have instigated measures to control inflation and improve the economys health. RBI has maintained steady repo rates so as not to cause unwanted disruptions in the market.

The government has also taken steps such as reducing the excise duty on petrol and diesel and cutting import duty on key raw materials and crude edible oils. The decrease in inflation rates in future years can be attributed to the governments implementation of economic policies that manage inflation - these include monetary policies, fiscal policies, and supply-side policies.

Indias per capita income is expected to climb by almost 7.3% from CY23 to CY28, the expected rise from US$ 2.6K to US $3.9K in per capita income is pivotal in Indias transformation into a middle-income economy. The importance of external trade and growing household consumption are significant factors contributing to Indias economic growth. With a large domestic consumption base, substantial per capita income growth, and a demographic advantage, India is positioned as a market with vast growth opportunities.

INDIA MANUFACTURING

The Indian manufacturing sector is a vital component of the countrys economic landscape, contributing significantly to GDP growth, employment generation, and overall industrial development. Marked by a diverse range of industries, including automobile, textiles, pharmaceuticals, electronics, and more, the sector reflects Indias multifaceted industrial prowess. Initiatives like the ‘Make in India campaign attracted foreign investment and positioned India as a global manufacturing hub. The governments strategic focus on ease of doing business, policy reforms, and the introduction of schemes such as the Production Linked Incentive (PLI) further emphasizes its commitment to nurturing a robust manufacturing ecosystem.

With a growing emphasis on innovation, sustainability, and technological advancements, the Indian manufacturing sector is on track for dynamic growth, contributing substantially to the nations economic resilience and competitiveness on the global stage. The overall contribution of Indias manufacturing sector to GVA was 17.3% in FY24. The absolute GVA from manufacturing has increased with a CAGR of 3.7% from FY18 to FY24.

Outlook

The Index of Industrial Production (IIP) is a key economic indicator that measures the growth of various sectors in the industrial output of a country. The primary purpose of the IIP is to assess the industrial output and production trends in the manufacturing, mining, and electricity sectors. Post COVID-19, IIP witnessed significant growth in FY22, growing at a rate of ~12%. In FY24, IIP continued its growth and rose by ~5% from FY23.

The growth of Indian manufacturing sector is influenced by several factors, primarily driven by government initiatives. "Make in India", creating a favorable environment for industrial expansion. Indias demographic dividend, with a large and skilled workforce, contributes to heightened productivity and innovation. Investments in infrastructure development, technological advancements, and the integration of digital technologies further influence growth.

Global companies "China Plus One" strategy, which involves diversifying supply chains and considering India as an alternative manufacturing hub, makes India more attractive to companies around the world. Collaborative efforts between the public and private sectors, coupled with a focus on sustainable practices, play pivotal roles in enabling the sustained expansion of the Indian manufacturing sector.

The government has set a target to boost Indias total exports to US$ 2T by 2030, with an equal share coming from both the merchandise and services sectors. The policy emphasizes the promotion and development of exports, shifting from incentive-based approaches to a more facilitative system driven by technology and collaboration principles. FTP 2023 establishes implementation mechanisms within a paperless, online environment, building upon previous initiatives focused on enhancing the ‘ease of doing business Reductions in fee structures and IT-based schemes are aimed at simplifying access to export benefits for MSMEs and other stakeholders.

There are initiatives to encourage the internationalization of the Indian Rupee. Additionally, efforts are being made to enhance manufacturing infrastructure through the establishment of additional ‘Towns of Export Excellence offering export promotion benefits. The government aims to expand initiatives like ‘Vivaad se Vishwaa to minimize potential litigations and foster trust among foreign investors.

TRENDS IN ENGINEERING PRODUCT

The engineering products segment in India has historically experienced a trade deficit, indicating that the value of high-end engineering goods imported into the country has consistently exceeded the value of the exported goods. In FY22, due to recovery from the pandemic, exports increased to US$ 108B from US$ 74B in FY21. The exports have been rising at a CAGR of 5.6% from FY18 to FY24. Imports, on the other hand, have been increasing at a CAGR of 6.9% from FY18 to FY24. India, in FY22, witnessed a surplus as imports only increased to US$ 105B in FY22. However, due to high inflation rates and elevated commodity prices, the value of imports increased to US$ 134B in FY24.

INDUSTRY OVERVIEW

Gala Precision Engineering is positioned as a precision component manufacturer in the supply chain, supplying specialized fastening solutions, disc springs, strip springs, coils, spiral springs, and wedge lock washers. Their primary clientele consists of major OEMs, tier 1 & channel partners, spanning diverse industries including renewable energy, railways, automotive, electrical, and more.

GLOBAL MARKET FOR DISC & STRIP SPRINGS AND WEDGE LOCK WASHERS (DSS & WLW)

DSS & WLW consists of disc springs & strip springs and wedge lock washers represented below: DSS & WLW are spring and fastening solutions used for industrial applications when mechanical devices are required to apply force. Disc springs deliver powerful spring forces in a compact space.

Their unique layouts in stacks boost both forces and deflections. Adjusting component geometry allows precise control of the load/deflection curve—a major advantage. WLW are washers with wedge-lock technology, a cutting-edge solution, transform bolted joints by emphasizing tension over friction. They ensure a secure, vibration-resistant joint with exceptional longevity and reliability. These components are used in different industries like renewable energy, railway infrastructure, automobiles, and others.

The application varies as per the requirement from load control & regulation, vibration dampers or to provide a damping effect in vehicle transmission, braking systems of wind turbines, and shock absorption depending on industry. Gala Precision Engineerings Wedge Lock Washer has been tested successfully in Germany and is in conformity with the requirements of Standard DIN 25201-4 with the clamp force staying constant after almost 2,000 cycles of the Junker test.

The global DSS & WLW market is valued at ~ US$ 891M in CY23 witnessing a CAGR of 6.2% during CY20-23. Gala Precision Engineering has a market share of ~2% in the global DSS market as of CY23*. In this, WLW is contributing ~ US$ 260M as of CY23. The WLW market is mostly dominated by two European manufacturers NordLock (Sweden) & Heico (Germany).

MANUFACTURING PROCESS

1. Cold process of disc springs with thickness <6mm

The manufacturing process starts with rigorous inspection and testing of incoming raw materials to ensure they meet quality standards. The verified materials are stored in a controlled environment. The subsequent stages include shearing, blanking, precision cutting, and heat treatment. Posttreatment, deburring, machining, and bending are performed. The final steps include oiling surface coating as per customers requirements, followed by a thorough inspection for compliance with specifications, applying identification labels, and securely packaging for dispatch. Below is the manufacturing process for disc sprigs with cold processing through metal pressing, hammer, or rolling for disc springs of <6 mm. For this thickness hot forging is not required due to the greater malleability of steel.

Gala Precision Engineering has implemented various semi-autonomous manufacturing processes to reduce manual intervention. This has improved efficiency and helped in saving ~100 units of manpower between FY18-23. Gala Precision Engineering supplies DSS to leading OEMs due to the adoption of various quality standards such as DIN 2093 and certifications such as IATF 16949 and ISO 9001:2015.

2. Hot process of disc springs with thickness >6mm

The manufacturing process starts with rigorous inspection and testing of incoming raw materials to ensure quality and adherence to specifications. Inspected materials are stored in a controlled environment. The process includes rod cutting, forging, annealing, and machining, followed by heat treatment, tempering, and coating in a phosphate solution. Oiling enhances corrosion resistance and finishing. A final inspection ensures compliance before assembling, followed by applying identification labels, and securely packaging for dispatch. Outlined below is the manufacturing process for DSS through hot process for disc springs of >6 mm due to the requirement of hot forging due to reduced malleability of relatively thicker sheets of steel.

MARKET FORECAST AND GROWTH DRIVERS

The DSS & WLW market is expected to reach a value of US$ 1,065M in CY26 witnessing a growth of 6.1% during CY23-26P The end-user industry growth will be the key growth driver for the DSS & WLW market. Renewable energy, automobile & infrastructure are some of the key industries showing good growth potential.

Increase in renewable energy capacity: As part of the worlds climate goals, the leaders of the G20 summit have pledged to triple their installed renewable energy capacity by CY30 from the current capacity of CY23.

The focus will be on developing wind, hydroelectric power, and solar energy.

1. EU: The European Commission has introduced updated climate change mitigation and adaptation targets for CY30, aiming to raise the current 32% target to a minimum of 40% for renewable energy sources in overall energy composition.

2. US: The US Interior Department, along with federal agencies, has mandated a boost in renewable energy output on public lands and waters. This involves plans to achieve 30 GW of offshore wind by CY30, 15 GW of floating offshore wind by CY35, and permitting at least 25 GW of onshore renewable energy by CY25.

RENEWABLE ENERGY INDUSTRY

In the renewable energy industry, DSS & WLW are used in wind energy and hydroelectricity applications.

Essentiality of disc springs & wedge lock washers in renewable energy industry

Disc springs: These are essential for the operation of renewable energy systems, including wind turbines and hydroelectric plants. It plays a crucial role in ensuring structural stability and minimizing the impact of dynamic load. Without these components, the system would be vulnerable to wear and damage, leading to reduced energy production and increased maintenance expenses. Disc springs offer the ability to work with high loads in small spaces.

Wedge lock washers: In renewable energy systems, the structural integrity of various components relies significantly on WLW. Its absence can lead to improperly fastened connections, thus creating safety hazards and possible catastrophic failures in associated structures. The wedge-locking action of these washers ensures that the bolted joints remain secure even in high-vibration environments. GWLW reduces the overall cost of OEMs by reducing the maintenance frequency of critical parts including blades.

COMPARISON OF DISC SPRINGS & WEDGE LOCK WASHERS WITH KEY SELECT SUBSTITUTES IN THE RENEWABLE ENERGY INDUSTRY

There are different types of springs available as a substitute for disc springs. However, each type of spring provides some specific support which the other type may not be able to provide effectively and efficiently.

For instance, wave springs, which are also known as coiled wave springs or scrowave springs, are a type of spring made up of pre-hardened flat wire in a process called on-edge coiling. Wave springs with multiple turns can easily replace multiple stacked washers, simply by adjusting the number of turns. They are used as bearing preload across motors, brakes & drives for machines used in producing renewable energy. It offers deflection curves with a wider and flatter linear force region, enabling it to meet specific spring force requirements.

However, one critical disadvantage of using wave springs over disc springs is the risk of deformity when exposed to high loads. This is a frequent situation in renewable energy. The force provided by wave springs is lower compared to disc springs, which may result in brake actuation failure. Another notable advantage that Disc springs offer is that they allow for high loads in small spaces compared to wave springs.

In the renewable energy sector, DSS & WLW are indispensable for ensuring structural integrity and safety. Their applications in yaw brake systems, thrust bearing mechanisms, and structural components are crucial. While substitutes like wave springs offer alternatives, they come with their limitations.

AS A SUBSTITUTE OF WEDGE LOCK WASHERS:

Different types of standard washers can be used instead of WLW, but reproducing the wedge-locking mechanism with other alternatives is challenging. WLW offers higher security compared to standard washers because they rely on tension rather than friction. Theyre specifically employed to secure bolted joints exposed to intense vibration and dynamic loads. Unlike WLW, standard washers spread loads over a larger surface area.

GROWTH DRIVERS

The renewable energy industry is subjected to growth due to government policies focusing on mitigating international climate change. Regions like the European Union and China have aimed to increase their renewable energy production capacity significantly. This increase in demand for renewable energy will lead to an increase in consumption of DSS & WLW.

• Increased energy production: Compared to CY15-20, onshore wind additions will be 25% higher on average till CY26. IEA forecasted that the annual onshore wind addition will be 75 GW per year on an average from CY21-26. By CY26, the total offshore wind capacity is forecasted to be more than the triple current capacity and will account for one-fifth of the global wind market.

• Government policy action:

- COP26: Agreements like COP26 will accelerate the adoption of renewable energy from CY21-26, with a ~95% increase in global power capacity coming from renewable energy. The expansion of renewable energy capacity in the United States is 65% greater than in the previous five years.

- USA: The Inflation Reduction Act of CY22 provides tax incentives for clean energy and extends the Investment Tax Credit to offer a ~30% credit. The act also introduces a Production Tax Credit of US$ 0.0275/kWh for eligible investments in wind, solar, energy storage, and others, subject to prevailing wage and apprenticeship criteria for projects over 1 MW AC. Additionally, the IRA of CY22 includes federal tax incentives for commercial projects using geothermal water source heat pumps to save energy.

- EU: The EU, in line with the European Green Deal, has raised its targets for renewable energy and energy efficiency. By CY30, it aims for a minimum of 42.5% renewable energy share and a goal of ~45%. Additionally, theres a commitment to improve energy efficiency by 12%.

• Energy security: Countries are becoming more inclined towards renewable energy sources like solar and wind due to concerns about energy security arising from Russias invasion of Ukraine. This shift aims to decrease dependence on imported fossil fuels, the prices of which have experienced significant increases. The global capacity for renewable power is projected to increase by 2,400 GW between CY22-27.

Investment in hydroelectricity: In CY23, hydroelectricity generation stood at 4,210 TWh, contributing 14% of global electricity supply. To achieve Net Zero Emissions by CY50, hydropower aims for a CAGR of 4% from CY23-30, targeting 5,500 TWh yearly. However, recent growth falls short, emphasizing the need for stronger efforts, particularly in permitting and project sustainability. Hydropower, a vital clean energy component, deserves recognition and support. Europe commissioned a record 2 GW of pumped storage hydropower in CY22, however, hydropower generation in CY23 is at comparable levels to CY22, while the U.S. enhanced hydropower support with the Inflation Reduction Act in August CY22.

INDUSTRIALS

The industrial sector encompasses off-highway vehicles, electrical & power equipment, and heavy machinery. DSS & WLW play a crucial role in various internal components of off-highway vehicles, including transaxles, torque limiters, and hydraulic motors. Additionally, DSS & WLW find applications in transmission lines, transformers, and elevators. The projected value of the overall DSS & WLW market for industrials is anticipated to reach US$ 837M by the end of CY26P. This growth is primarily attributed to substantial investments by governments in infrastructure, construction, and the renewable energy industry. The industrial sector is expected to experience future growth, with a CAGR of 5.9% during the period from CY23-26P.

Off-highway vehicle

Off-highway vehicles refer to all types of vehicles utilized for non-transportation-related purposes such as agriculture, construction, and mining. Common uses examples are vehicles such as tractors, combine harvesters, excavators, dozers, dump trucks, etc. DSS & WLW play a critical role in various internal components of off-highway vehicles such as transaxles, torque limiters, and hydraulic motors.

Disc springs: Disc springs play a crucial role in keeping off-road vehicles stable and safe, especially when operating in rugged and challenging environments. They help manage vibrations, making sure the ride is comfortable and ensuring that key components like brakes function effectively.

Wedge lock washers: WLW are crucial to keeping off-road vehicles strong and safe. When connections get loose, it can cause accidents or equipment breakdowns, especially when these vehicles face heavy loads and rough terrain. Thats why WLW are essential for ensuring the safety and dependability of off-road vehicles.

COMPARISON OF DISC SPRINGS WITH KEY SELECT SUBSTITUTES IN OFF-HIGHWAY VEHICLES (INDUSTRIALS)

Wave springs are an alternative to coil springs which are more compact in nature but have lesser travel and can withstand lesser loads compared to disc springs.

There are different types of wave springs available, such as nested wave springs that can take the place of a single disc spring. These are pre-stacked in parallel from a single continuous filament of flat wire, eliminating the need to stack individual springs for higher loads. The spring rate of nested wave springs increases with the number of turns.

Interlaced wave springs, on the other hand, are great for providing heavy loads in small spaces, serving as substitutes for heavy-duty coil springs or disc spring assemblies. These springs are created by intertwining two separate wave springs, causing their turns to interlace throughout the entire length. However, its worth noting that while wave springs are versatile, they may not be as rugged as disc springs. In heavy-use applications like those in off-highway vehicles, disc springs have the advantage of handling higher loads as compared with other alternatives.

Electrical power equipment

Electrical power equipment refers to the critical elements of electricity generation and transmission such as electricity generation plants and transmission lines. DSS & WLW have various use cases such as the dampening of vibrations in high-voltage transformers and as a component of spacers between individual electricity transmission lines.

Application of disc spring and wedge lock washers in electrical & power equipment (industrials)

Essentiality of disc spring & wedge lock washers in electrical & power equipment (industrials)

Disc Springs: Disc springs play a crucial role in ensuring stable electrical connections in medium-voltage switchgear.

Wedge lock washers: WLW provides better protection against vibrations compared to regular washers. This helps in decreasing downtime by reducing the need for frequent retightening of fasteners. Additionally, they enhance safety and prevent accidents leading to long-term usage and less maintenance cost.

Comparison of disc springs with key select substitutes in electrical & power equipment (industrials)

Wave springs can be used as substitutes for disc springs in electrical and power equipment, providing similar load-bearing capacity while saving space and reducing torsional loads. However, its important to note that while wave springs can save space, they have a lower load capacity compared to disc springs. Additionally, their more intricate design and vulnerability to wear and tear could affect their long-term reliability, as discussed earlier.

Heavy machinery refers to various equipment that enables or powers the inner workings of various industries such as manufacturing, infrastructure, and air conditioning. DSS & WLW play multifaceted roles in each of these industries, for instance, disk spring assemblies are used in elevator safety breaks which hold elevators in place in case of failure. The global DSS & WLW for heavy machinery market was valued at ~ US$ 24M in CY23 witnessing a CAGR of 6.0% during CY20-23.

GROWTH OVERVIEW:

The heavy machinery industry is poised for robust growth driven by key factors. Heavy machinery is used for steel production, & growing steel demand due to construction needs, and urbanization, Furthermore, heat exchangers benefit from energy-efficient solutions and urbanization-driven HVAC demand. Global infrastructure investments are expected to boost industries, including cement, construction equipment, and components like disc springs & strip springs, during both the construction and operational phases.

Railway industry

In the railway industry, DSS & WLW are primarily used for rolling stock & infrastructure. Applications for disc springs & wedge lock washers in railway industry (mobility)

Essentiality of disc springs & wedge lock washers in the railway industry (mobility)

Disc springs: These are essential for the proper functioning of railway suspension systems and applications where dynamic spring-like motion is required. They are used for bolt loading and shock absorption while ensuring passenger comfort and safety. Without these components, the ride quality of trains would be significantly compromised, with a greater risk of damage or derailment.

Wedge lock washers: WLW is essential for maintaining the reliability of railway infrastructure. They prevent loosening while maintaining bolt preload under the intense vibrations and dynamic loads generated by rail traffic. WLW enhances safety, reduces maintenance costs, and extends the lifespan of essential railway equipment.

COMPARISON OF DISC SPRINGS & WEDGE LOCK WASHERS WITH KEY SELECT SUBSTITUTES IN THE RAILWAY INDUSTRY (MOBILITY):

Wave springs have the capability to dampen vibrations and absorb impact energy within train systems. Additionally, they contribute to minimizing the overall size and weight of an assembly by as much 50%.

These springs excel in shock absorption, load distribution, and stabilizing rail systems. In comparison, disc springs can deliver a greater force within a confined space when contrasted with wave springs.

As a substitute of wedge lock washers:

Traditional washers, with their thin, often round, or square plates featuring a central aperture, also emerge as substitutes. Typically used to evenly distribute force from threaded fasteners like bolts, traditional washers offer an alternative to WLW. These washers play a crucial role in distributing loads while fastening components like push-pull rods, control arms of coaches, and traction motors. However traditional washers fail to encounter challenges in high-vibration environments, potentially loosening up and posing risks to cargo and lives.

AUTOMOBILE INDUSTRY:

The automobile industry consists of 4-wheeled & 2-wheeled vehicles powered by internal combustion engines and electric drivetrains, along with heavy commercial vehicles. Various types of strip springs such as clip springs, etc. play a critical role in the functioning of the vehicles clutch and & brake mechanism.

Application of strip spring in the automobile industry (mobility)

Essentiality of strip spring in the automobile industry (mobility)

Strip springs are crucial for the proper operation of clutch and brake systems. Without them, a vehicle would have difficulty changing gears and stopping effectively, jeopardizing both driver safety and the overall functionality of the automobile.

COMPARISON OF STRIP SPRINGS WITH KEY SELECT SUBSTITUTES IN AUTOMOBILE INDUSTRY (MOBILITY):

Strip springs are highly customizable as they are built as per specifications and owing to this high flexibility in terms of applications and use cases met, strip springs are the go-to choice for a high number of applications. Wave springs may be able to meet certain application requirements where strip springs are used, however, their relatively higher manufacturing cost and sensitivity to misalignment may leave them at a disadvantage. Coil springs may also be used to replace stacks of strip springs; however, coil springs take up more space and may be prone to buckling.

1. Indian market for Disc & Strip Springs and Wedge Lock Washers (DSS & WLW)

DSS & WLW serve as spring and fastening solutions employed in industrial settings where mechanical devices are needed to exert force. These elements find application across diverse industries such as renewable energy, infrastructure, automobiles, and more.

Their usage spans a range of applications, including pressure controls and regulators, vehicle braking systems, valves, and shock absorbers, tailored to the specific needs of each industry. The Indian DSS & WLW market is valued at ~ US$ 115M in FY24 witnessing a CAGR of 6.0% during FY21-24. Gala Precision Engineering is a major DSS manufacturer & has 10% market share in the Indian disc spring market as of FY24.

2. Indian market for Coil & Spiral Spring (CSS)

CSS consist of coil spring and spiral spring, represented below:

A coil spring is a mechanical device with a helical shape, and it can be either close-wound or open-wound. Spiral springs, on the other hand, are a specific type of spring made from rectangular metal strips that are wound into a flat spiral. While coil springs store mechanical potential energy, spiral springs are designed to store and release rotational energy in the form of torque. These types of springs find applications in various areas such as automotive suspensions, electronic devices, valves, switches, machinery, and more. The effectiveness of coil and spiral springs depends on how and where they are used. The Indian CSS market is valued at US$ 459M in FY24 witnessing a CAGR of 9.8% during FY24-27P.

Gala Precision Engineering is positioning itself as a key import substitution opportunity for European spring suppliers looking to take advantage of government schemes such as the production-linked incentives scheme. It has also entered a new related product category called retractor springs. These springs are a critical component for increasing vehicle safety.

3. Indian market for Special Fasteners (Studs, Nuts, & Bolts)

The fastener industry in India is vital for renewable energy, construction, and electrical equipment. As the economy grows and industrialization increases, theres a rising demand for fasteners. Indian manufacturers serve both domestic and international markets, contributing to exports. Fasteners are crucial in the expanding renewable energy sector, and the construction boom drives the need for reliable solutions. Challenges like fluctuating raw material prices and global quality standards persist, but the industrys resilience positions it as a key player in Indias manufacturing.

The Indian SFS market size stands at US$ 6.6B as of FY24, growing at a CAGR of 18.0% between FY24- 27. This market consists of renewable energy, mobility, industrials & others.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

	Industry	Market size (US$ M)
		FY21	FY24	FY27P*
	Renewables	1.1	1.4	1.8
	Off-highway	66.7	77.4	89.9
Industrials	Electrical & power	14.2	17.5	21.6
	Heavy machinery	0.7	0.9	1.1
Mobility	Automobiles	13.8	17.7	23.7
	Total	96.5	114.8	138.1

Note(s): ‘Projected

India has been actively working to achieve its climate change mitigation and adaptation targets by implementing various policies and making substantial investments (~INR 20,000 Cr). It is one of the largest countries in hydro and solar power, continually increasing its capacity through various projects. DSS & WLW play a crucial role in ensuring the structural integrity of wind energy and hydroelectricity plants. These technologies share the same applications, essentiality, and alternatives as previously mentioned in the global section, possessing similar quality and functionality. The market for DSS & WLW in the Indian renewable energy industry was valued at US$ 1.4M in FY24 and is expected to increase at a CAGR of ~9% during FY24-27.

GROWTH DRIVERS

The renewable energy sector is experiencing growth thanks to increased investments and policies aimed at addressing international climate change. The rising demand for electricity and the cost advantages of establishing renewable energy infrastructure are also contributing to this growth. As the demand for renewable energy continues to increase, there will be a corresponding rise in the consumption of DSS & WLW.

Off-highway vehicles include things like tractors, harvesters, excavators, and more, used for jobs like farming and construction. India is expected to see a rise in demand for these vehicles due to increased agricultural and construction activities. DSS & WLW plays a crucial role in internal components like transaxles, torque limiters, and hydraulic motors in these vehicles as mentioned in the application and essentiality part of global. The Indian DSS & WLW market for off-highway vehicle industry was valued at ~ US$ 77M in FY24 witnessing a CAGR of 5.1% during FY21-24.

Growth Drivers

The off-highway vehicle industry is set to experience substantial growth due to several factors. The increased investment in infrastructure is anticipated to stimulate the sales of construction vehicles. Worldwide, the demand for agricultural machinery is being fueled by large farms, and the growing awareness of mechanization in emerging economies is expected to further improve the market. Additionally, government policy decisions that prioritize infrastructure development and farmer welfare are fostering a favorable environment for the expansion of off-highway vehicles.

Heavy machinery refers to various equipment that enable or power the inner workings of various industries such as manufacturing, infrastructure, and HVAC. DSS & WLW play multifaceted roles in each of these industries as mentioned in global section detail. For instance, disk spring assemblies are used in elevator safety breaks which hold elevators in place in case of failure. The Indian DSS & WLW market for heavy machinery industry was valued at US$ 1M in FY24 witnessing a CAGR of 6.8% during FY21-24.

Growth Drivers

The heavy machinery industry is set to grow strongly because of key factors. Heavy machinery is essential for steel production, and the increasing demand for steel, driven by construction and urbanization, contributes to this growth. Additionally, energy-efficient solutions for heat exchangers and the demand for HVAC systems due to urbanization further fuel this expansion. Investments in domestic infrastructure are expected to support

various industries, including cement, construction equipment, and components like disc springs, both during construction and operations.

		Market size	(US$ M)
	Industry	FY21	FY24	FY27P*
	Off-highway	18.3	21.2	24.5
Industrials
	Industrial infrastructure	9.1	10.8	12.7
	Commercial vehicles	19.3	22.6	26.4
Mobility
	Automobiles	315.1	404.1	544.0
	Total	361.8	458.5	607.6

Note(s): *Projected

GLOBAL MARKET FOR SPECIAL FASTENERS (STUDS, NUTS, & BOLTS)

Special fasteners consist of studs, nuts, bolts, Gala Precision Engineerings global serviceable addressable market (SAM) consists of 9 application segments (agricultural, construction, mining and material handling equipment, renewable energy, railways, warehousing, electrical and general engineering equipment including machine building) and consists of 7 product categories (hex bolt, Allen bolt, hex nut, flange bolt, flange nut, self-locking nut, and castel nut). The SAM is valued at US$ 25,613M as of CY23.

The fastener industry is crucial across sectors, supplying essential components like screws, bolts, nuts, and rivets for construction, renewable energy, and aerospace. Growth is fueled by increased construction, railway development, and the rising need for electrical equipment. As global infrastructure projects increase, theres a growing demand for fasteners to ensure assembly and structural integrity. The global market size for SFS currently stands at ~US$ 97B as of CY23 and is growing at a CAGR of 6.7% between CY23-26. This market comprises of renewable energy, industrials and mobility industry along with others.

Gala Precision Engineering offers high tensile large fasteners sizes M24 to M72, which have applications in renewable energy industry. The renewable energy sector has a strong outlook due to governments focus on non-carbon emissions.

The renewable energy SFS market size stands at US$ 10B as of CY23, growing at CAGR of 6% between CY23-26. The market consists of solar, wind, nuclear and hydroelectricity power generation units.

Industrials encompass off-highway vehicles, electrical and power equipment, and heavy machinery. In off- highway vehicles, fasteners are utilized in key areas such as chassis, engines, and suspension. These components play a crucial role in connecting and securing various parts, including panels, cabinets, and motors within electrical systems. Their significance extends to critical applications in construction, mining, and other heavy industries. The overall market for SFS in the industrial sector is projected to achieve a value of US$ 41B in CY23. This growth is primarily attributed to increased investments from regions such as Europe, the US, and China, coupled with heightened construction activity. Anticipated growth in the mobility industry is forecasted, with a CAGR of 6.0% expected during the period from CY23-26P.

COMPARISON OF SPECIAL FASTENERS WITH KEY SELECT SUBSTITUTES IN THE OFF-HIGHWAY VEHICLE INDUSTRY (INDUSTRIALS)

Welding: Welding is a simpler method to permanently join parts in off-road vehicles. Its easier and faster, but its costly because it needs special equipment and trained professionals. On the other hand, fasteners offer flexibility with lower structural stress but may loosen up due to vibrations.

Adhesives: Adhesives spread stress across the whole bonding surface, being much lighter than fasteners and cutting weight by 15%. Fasteners are relatively simple to install, can be disassembled, and require less maintenance. On the other hand, adhesives provide advantages like corrosion reduction and vibration dampening.

GROWTH DRIVERS

The rising interest in battery-operated electric vehicles (EVs) due to environmental concerns, is boosting the demand for fasteners. Additionally, the resurgence in construction activity, fuelled by the return to office work, is spurring the need for construction materials and off-duty vehicles like forklifts, cranes, and backhoes, further increasing the demand for fasteners to ensure structural stability and safety.

The fastener industry in India is vital for renewable energy, construction, and electrical equipment. As the economy grows and industrialization increases, theres a rising demand for fasteners. Indian manufacturers serve both domestic and international markets, contributing to exports. Fasteners are crucial in the expanding renewable energy sector, and the construction boom drives the need for reliable solutions. Challenges like fluctuating raw material prices and global quality standards persist, but the industrys resilience positions it as a key player in Indias manufacturing.

The Indian SFS market size stands at US$ 6.6B as of FY24, growing at a CAGR of 18.0% between FY24- 27. This market consists of renewable energy, mobility, industrials & others.

Outlook

Indian government is taking significant steps to improve its railway infrastructure, as outlined in the National Rail Plan (NRP) and backed by substantial budget allocations. With a focus on high-speed rail, increased investments, and electrification of the railway network, there is a growing demand for fasteners in the industry, crucial for ensuring the structural integrity of railway infrastructure.

COMPANY OVERVIEW

Gala Precision Engineering is a key Indian manufacturer of high tensile fasteners and technical springs. Gala Precision Engineering also offers disc springs under the Gala brand & wedge lock washers under the Gallock brand. These products are as per German DIN standards and can be customized to meet the requirements of 175+ active global customers. Gala Precision Engineering has a strong global presence across 25+ global export countries with an office in Frankfurt Germany to better service their European clientele.

Gala Precision Engineering has 30+ years of experience in understanding spring material behavior and has tie ups with global research institutes in Germany and India for new product testing and process validation.

Gala Precision Engineering has alliances with steel mills in India, Europe, Brazil, Korea, etc. from which it acquires 30% of its raw materials. Such alliances are key for maintaining consistency in quality and delivery.

Product development takes 3 to 9 months, followed by a 3 to 12-month testing and validation phase incurring significant costs. Plant audits by clients occur during this period. The process concludes with a 12 to 18- month supply ramp-up and quality stabilization, showcasing Galas meticulous and time-consuming operations that prioritize thorough testing, validation, and quality assurance for reliable product delivery to clients. In addition to its facilities in India, Gala Precision Engineering maintains an office in Germany as well. Gala Precision Engineering is adding new customers for disc springs in high-value markets such as Europe and USA and is mainly competing with German producers to improve its market share.

With a global clientele, Galas exports reach 25+ countries, encompassing major markets such as Germany, Denmark, China, Italy, Brazil, USA, Sweden, Switzerland and others contributing 40% to total sales.

Gala is setting up a new facility in Chennai dedicated to the production of special fastening solutions.

Gala specializes in Strip Springs designed for high fatigue applications in two-wheelers, four-wheelers, and off-highway vehicles. Their product range also includes disc springs conforming to DIN 2093 standards, Bearing Series, and customized variants featuring a variety of raw materials and surface coating options. Gala is a supplier for global and Indian players like Brembo Brake India Pvt Ltd., Bufab India Fasteners Pvt Ltd., Vestas Wind Technology India Pvt. Ltd., Endurance Technologies Ltd., Exedy Clutch India Pvt Ltd., Larsen & Toubro Electrical Automation (L&T Electrical Automation), Schneider Electric SE, MSL Driveline Systems Ltd. (formerly Mahindra Sona Limited), Wuerth Industrial Services Pvt Ltd., General Electric Vernova (GE Vernova), Enercon Global GmbH, Senvion S.A., Schaeffler Technologies AG & Co. KG, Hitachi Astemo Ltd., Altra Industrial Motion, Webtec Products Limited, LPS Bossard Pvt. Ltd. And Legrand India Pvt. Ltd.

Gala Precision Engineering has a significant presence in the disc spring market for renewable energy industry with 85% share in the Indian market as of FY24 and 5% share in the global market as of CY23.

Gala Precision Engineering has 15% market share in the Indian SFS market for wind turbines as of FY24. (Note: *Gala Precision Engineerings revenue taken for FY24)

PRODUCTS

DISC & STRIP SPRINGS AND WEDGE LOCK WASHERS (DSS & WLW)

Gala Precision Engineering offers disc springs as per DIN 2093 standard or as per custom requirements to the client needs. Within groups of DIN 2093, standard sizes as per series A, B and C are provided. Gala Precision Engineering has built-up in-house expertise and cooperates with German universities to develop high performance disc springs which offer high fatigue life at high stress levels. Furthermore, the size of the disc springs can be reduced while meeting the same load / deflection requirements due to Gala Precision Engineerings improved manufacturing technology. Other advantages of Gala Precision Engineerings disc springs include 100+ standard sizes available ex-stock, ISO 9001:2015 / IATF16949 certified manufacturing facilities and the availability of disc spring selection software online. Gala Precision Engineering is competing domestically with International Industrial Springs, while internationally with Muhr und Bender KG, Schnorr GmbH & Christian Bauer GmbH + Co. KG.

Gala Precision Engineering manufactures an extensive range of strip springs for Indian and global OEMs across automotives, off-highway vehicles, and more industries. Some key applications for these strip springs are two wheelers, four wheelers and off highway vehicles. Gala is the partner of various notable OEMs such as Brembo Brake India Pvt Ltd., and Endurance Technologies Ltd.

COIL & SPIRAL SPRINGS (CSS)

In 2015, Gala Precision Engineering commenced the production of CSS, drawing upon its extensive manufacturing expertise to provide springs tailored for diverse critical applications. The company boasts IATF16949 and ISO 9001:2015 certified manufacturing facilities, ensuring high-quality standards.

Gala Precision Engineering has various advance manufacturing processes in the manufacturing of coil springs, including the usage of CNC Wafios machine from Germany, Wheelabrator shot peening machine, spring grinding and chamfering CNC machine & multi station automatic scragging and load testing machine. They even offer various types of surface coatings.

Gala Precision Engineerings spiral springs offer high durability, optimum design for space saving, capability to offer variety of surface treatments and coatings which are capable of meeting stringent tolerances.

Gala Precision Engineerings CSS solutions have found adoption across numerous industries such as automobiles, off-highway vehicles, commercial vehicles & industrial infrastructure.

Within the CSS category, Gala faces competition from industry players like Stumpp Schuele & Somappa Springs Pvt. Ltd., NHK Springs India Ltd., and Muhr und Bender KG.

SPECIAL FASTENING SOLUTIONS (SFS)

Gala Precision Engineering manufactures special fastening solutions such as anchor bolts and studs from various materials such as alloy steel / high tensile steel (as per ISO 890-1, DIN & ISO series standard), and structural steel. These come with various coatings such as zinc flake coating, delta tone, geomet, magni, mechanical zinc plating (Cr 6 free), and hot dip galvanizing.

Gala Precision Engineering is mainly competing with Randack Fasteners India Pvt. Ltd., Sundram Fasteners Ltd. &, Hiten Fasteners Pvt. Ltd. in the Indian SFS market. In the global segment they are competing with Cooper & Turner Ltd., Rose Holm A/S, & August Freidberg GmbH.

Gala Precision Engineerings SFS are used across various applications such as wind energy, hydro electricity generation, railways, off highway vehicles, heavy machinery & electricals.

THREATS AND OPPORTUNITIES

The precision engineering components industry serves as a critical enabler for various high-value sectors, primarily focusing on mobility, industrials, and renewable energy. In the mobility sector, these components are essential for both rail systems and vehicles, ensuring safety and performance. The industrial segment encompasses a broad range of applications including power transmission & infrastructure, off-highway vehicles, construction equipment, mining operations, oil and gas exploration, and infrastructure development. In the rapidly growing renewable energy sector, precision components play a crucial role in wind and hydroelectric power systems.

These precision-engineered parts, such as springs and fasteners, are fundamental to the functionality, efficiency, and reliability of complex mechanical systems across these sectors. The industry is characterized by its emphasis on tight tolerances, specialized material properties, and advanced manufacturing techniques.

EMERGING TRENDS

Gala Precision Engineering is a key Indian manufacturer of high tensile fasteners and technical springs. Gala Precision Engineering also offers disc springs under the Gala brand & wedge lock washers under the Gallock brand. These products are as per German DIN standards, and these market is witnessing exciting new trends that are shaping its future:

1. Technological Advancements in Production: The industry is embracing advancements in production processes to enhance efficiency and product quality.

3. Expanding Applications in Consumer Goods: These Products are finding their way into an increasing variety of consumer products. Their durability, corrosion resistance, and aesthetics make them ideal for everything from household appliances and cookware to building materials and automotive parts.

Outlook

The market is poised for continued growth, driven by its versatility, growing demand across diverse sectors, and ongoing advancements in production technology. The vast potential for new product applications and the increasing emphasis on sustainability, with stainless steels inherent longevity, further bolsters the markets optimistic outlook. As the world continues to urbanise and technological innovation accelerates, we can expect the stainless steel strip market to play an increasingly vital role in shaping our built environment and everyday lives.

RISKS AND MITIGATION STRATEGIES

1. Cyclical Nature of End-User Industries: Demand for these products can fluctuate with economic cycles, government incentives and technological shifts.

2. Diversified Product Portfolio: GPEL has strategically diversified its products portfolio, going beyond washers. The Companys product portfolio includes Disc & Strip Springs and Wedge Lock Washers, coil and includes spring coils , Gala Precision Engineering manufactures special fastening solutions such as anchor bolts and studs from various materials such as alloy steel / high tensile steel

3. Raw Material Price Volatility: Supply chain disruptions can trigger fluctuations in raw materials. Volatility in nickel and chromium prices can significantly impact the Companys profitability.

4. Strategic Sourcing and Hedging: The Company actively engages in long-term contracts with suppliers and explores alternative sourcing options to mitigate price volatility.

5. Different financial risks: A web of financial risk can affect the working of the Company. These risks might include everything from credit risks and interest rate risk (borrowing cost fluctuations) to liquidity risk (cash flow shortfalls) and foreign exchange risk (currency swings).

6. Proactive Management- The Company ensures each of the potential risks are monitored thoroughly. A dedicated pool of experts regularly gauges the Companys financial health and take proactive steps in case of any discrepancies

7. Regulatory Changes (Environmental, Trade): Evolving environmental regulations or changes in trade policies, particularly concerning stainless steel imports and exports, can disrupt operations. Failure to adhere to the regulations have the potential to tarnish the Companys image.

8. Proactive Compliance and Advocacy: The Company maintains a proactive approach to regulatory compliance, investing in eco-friendly technologies and participating in industry advocacy efforts to address potential trade barriers.

9. Technological Disruption: With advancements in manufacturing techniques or the emergence of alternative materials, existing processes or products obsolete. If the Company is not able to remain abreast with the latest technological advancements, it is likely to lose competitive advantage.

10. Continuous Innovation: The Companys dedicated in-house research and development facility focuses on staying at the forefront of technological advancements, continuously refining product designs and manufacturing processes.

11. Competition (Domestic and International): Intense Competition from established players and new entrants can put pressure on pricing and impact the Companys market share.

12. Focus on Quality and Differentiation: The Company maintains stringent quality standards, focusing on product differentiation through customization and value-added services. This enables the Company to foster strong, long-term relationships with its customers.

13. Operational Risks: Production downtime due to equipment malfunctions or disruptions in the supply chain can impact delivery schedules and affect customer satisfaction.

14. Preventive Maintenance and Supplier Diversification: The Company implements robust preventive maintenance programmes and has developed contingency plans to address potential supply chain disruptions. The Company also establishes healthy relationships with multiple suppliers to ensure a reliable supply of raw materials.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Companys internal control framework is designed to safeguard assets, maintain accurate accounting records, and ensure the reliability of financial information and data. This framework is supplemented by internal audits, management reviews, and documented policies and procedures. The Company has a well- defined organizational structure, clear authority levels, and established internal rules and guidelines for conducting business transactions. The Company remains committed to implementing further measures as necessary to adhere to all applicable procedures, guidelines, and regulations in a transparent manner.

The internal audit department conducts periodic reviews of the Companys operations, reporting its findings to the audit committee. This process includes evaluating the functionality and quality of internal controls, providing assurance of their adequacy and effectiveness. Internal audits are carried out as per a risk-based plan, which is reviewed by the audit committee. The committee regularly assesses the findings and recommendations for improvement, and is kept informed of the implementation status of actionable items.

Outlook

The Companys strategy to develop a varied clientele base has significantly reduced geographical concentration risks and ensured a steady stream of revenue. The Companys commitment to introducing new product designs and retaining existing customers, is expected to further enhance its market reach and cater to evolving demands.

Gala Precision Engineering is adding new customers for disc springs in high-value markets such as Europe and USA and is mainly competing with German producers to improve its market share.

FINANCIAL OVERVIEW

The Financial performance of the Company for the FY 2023-24 under review as compared to the previous FY 2022-23 are summarized below for your consideration:

	Standalone		Consolidated
Particulars	2023-24	2022-23	2023-24	2022-23
	(Amt in Millions)		(Amt in Million)
Revenue from Operations(Net)	1,999.11	1,634.30	2,040.19	1,654.65
Other Income	22.90	16.16	18.32	16.17
Total Revenue	2,022.01	1,650.46	2,058.51	1,670.82
Total Expenses	1,733.98	1,460.34	1,782.63	1,493.84
Profit Before Exceptional items and Tax	288.03	190.12	275.88	176.98
Add: Exceptional Items	(37.78)	24.02	(23.09)	97.59
Profit Before Tax	250.25	214.14	252.79	274.57
Tax Expense
Less: (a)Current Tax	54.09	30.00	54.09	30.00
(b) MAT Entitlement	-	-	-	-
(c) Deferred Tax Charge	(28.42)	(6.18)	(28.42)	(6.18)
(d)Deferred Tax Earlier years	-	-	-	-
(e) Current tax adjustments of earlier years	7.19	8.63	7.19	8.63
Total Tax Expense	32.86	32.45	32.86	32.45
Non-Controlling Interest	-	-	(3.40)	-
Profit After Taxes	217.40	181.69	223.33	242.12

KEY FINANCIAL RATIOS

Particulars	Numerator	Denominator	As at 31 March 2024	As at 31st March 2023
a) Current ratio	Current assets	Current liabilities	1.69	1.82
b) Debt equity ratio	Long Term Borrowings	shareholders equity	0.53	0.69
c) Debt service coverage ratio	Earnings available for debt service	Debt service = Interest + Principal repayments of Long Term Borrowings	3.06	2.72
d) Return on equity %	Net profits after taxes	shareholders equity	24.45%	18.68%
e) Inventory Turnover Ratio	Sales	Average inventory	3.71	3.46
f) Trade receivables turnover ratio	Revenue from operations	Average trade receivables	4.78	4.86
g) Trade payables turnover ratio	Purchases	Average trade payables	8.03	6.41
h) Net capital turnover ratio	Revenue from operations	Working capital	4.29	3.53
i) Net profit %	Net Profit After Taxes	Revenue from operations	12.76%	9.65%
j) Return on capital employed %	Earnings after exceptional items before interest and taxes	Capital employed	25.25%	19.25%

HUMAN RESOURCES

The Company acknowledges its employees as its most valuable asset and undertakes several initiatives to promote their overall well-being. The Companys human resource strategy invests in comprehensive training, promotes professional development and provides a holistic environment for the development of its employees.

Our ability to provide engineered products and services and to manage the complexity of our business depends, in part, on our ability to retain and attract semi-skilled and skilled and qualified manpower in the areas of management, product engineering, design, manufacture, servicing, sales, information technology, and finance. Competition for such personnel is intense and the cost of retaining or replacing such personnel may affect our profitability. In addition, our strategies for growth have placed, and are expected to continue to place, increased demands on our managements and employees skills and resources

GPEL believes that human potential knows no bound and that optimizing the workforce potential will bolster the Companys growth. This commitment is reflected in a positive employee-management relationship. As of June 30, 2024, the Company employed 294 permanent employees and 390 persons employed as contract employees, out of which we had a permanent workforce of 182 manufacturing workers, 19 permanent employees for stores and logistics, 19 permanent employees for quality assurance staff, 14 permanent employees for tool room development and maintenance staffs and 22 permanent employees for human resources and admin staffs. For further details, see "Our Business - Human Resources".

As on March 31, 2024 our employee benefit expenses was Rs 247.75 million, constituting 14.01% of our total expenses. Our Companys average attrition rate of employees during the last 3 Fiscals (FY 2022, FY2023, and FY 2024) is 10.51%.

The safety of the employees holds paramount importance for the Company. GPEL maintains standard safety protocols and provides regular safety trainings to ensure optimum safety. Through comprehensive HR policies, the Company has cultivated an inclusive work environment that priorities an employees both personal and professional development. GPEL has nurtured a skilled and adaptable workforce that contributes significantly to the Companys operational success.

Outlook

As on the date of this Prospectus, we have 2 labour unions in our manufacturing facilities located at Wada, Palghar, Maharashtra namely, Shramik Sena and Bharatiya Kamgar Sena. We have entered into wage settlement agreements with our unions. Further, while we have not experienced any strikes or labour unrest at any of our manufacturing facilities in the past, we cannot assure you that we will not experience work disruptions in the future due to disputes or other problems with our work force. Any such event, at our current facilities or at any new facilities that we may commission or acquire in the future, may adversely affect our ability to operate our business and serve our customers, and impair our relationships with key customers and suppliers, which may adversely impact our business and financial condition. Any changes in the existing labour laws of the countries in which we operate may increase our labour cost and may also increase time spent by our management in labour related matters, which could impact our business and results of operations. If labour laws become more stringent or are more strictly enforced, it may become difficult for us to maintain flexible human resource policies, discharge employees or downsize, any of which could have an adverse effect on our business, results of operations, financial condition and cash flows.

INFORMATION TECHNOLOGY

GPEL recognizes the critical role of information technology (IT) in driving the Company towards new heights of success. The Company has invested in a robust IT infrastructure to streamline its business operations. This technology-driven approach enables GPEL to enhance efficiency, optimize resource allocation and improve decision-making, propelling the Companys growth and outperforming its peers.

CAUTIONARY STATEMENT

Some of the statements in this management discussion and analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Key factors that can affect the Companys operations include changes in political and economic environment in India and abroad, tax laws, import duties, litigation, and labour relations.

By order of the Board of Directors For Gala Precision Engineering Limited

Kirit Vishanji Gala

Chairman and Managing Director DIN: 01540274 Date: September 5, 2024 Place: Thane

Registered Office:

A-801, 8th Floor, Thane One DIL Complex, Ghodbunder Road Majiwade,

Thane (west), Thane - 400610, India.

Tel: +91 022-69309224

Email Id: info@galagroup.com,

website: www.galagroup.com

CIN: U29268MH2009PLC190522