Harsha Engg Intl Management Discussions

Global Economy

The global economy is showing signs of a gradual recovery from the Covid-19 pandemic and geopolitical tensions. Chinas economy bouncing back strongly and supply chain disruptions being resolved, is helping the global economy recover faster. Disturbances to energy and food markets resulting in higher inflation from the war on Ukraine are receding, indicating a positive trajectory for the global economy. Additionally, most central banks have implemented a significant tightening of monetary policy to stabilise inflation. These developments offer hope for a brighter economic future.

Despite challenges related to high inflation and supply chain constraints in 2022, the global economy still managed to grow by a remarkable 3.4%. The EU and US experienced growth rates of 3.6% and 2.1%, respectively. Looking ahead, inflation is projected to decrease to 6.5%, while global output is expected to slowdown to 2.8% before rising to 3.0% in the next fiscal year. Due to the geopolitical tensions in Europe continuing, Eurozones growth rate may be lower. Asias growth is expected to increase, and Chinas GDP is projected to grow to 5.2% in 2023 before gradually decreasing to 4.5% in 2024 and stabilising below 4% in the long-term.

Overall, these projections suggest that the global economy is expected to continue growing and stabilising in the coming years, despite some challenges. The coordinated tightening of monetary policy and resolution of supply chain disruptions are likely to support this growth, along with the bounce back of key economies such as China.

Indian Economy

Indias economy has made remarkable progress, becoming the worlds fifth-largest economy in current dollars, and growing at an impressive rate of 7.2% in real terms for 2022-23, following an 8.7% real growth in the previous financial year. Despite facing challenges with inflation, which has been exacerbated by the Russia-Ukraine conflict. The Indian economy has almost recovered from the Covid-19 pandemic and is expected to continue growing at around 6.8%, with inflation projected to cool down from 6.6% in 2022-23 to 5.3% in the next fiscal year. Overall, the Indian economy is on a growth trajectory and is likely to see continued improvement in the coming

years. The Governments focus on capital expenditure to develop infrastructure is set to boost economic growth. The Governments Product Linked Incentive (PLI) schemes, especially for semiconductors, are expected to boost industrial and economic growth. This is supported by positive factors such as strong credit growth, improving consumer sentiment, increasing capacity utilisation levels, and significant Government spending. Indias economy is on a positive path, with the potential to overcome any persistent downside risks from the global growth slowdown and elevated input prices.

Industry Overview

Global Bearings Market

The global bearings market witnessed a CAGR of 5.6% from 2015 to 2019, growing from USD 85.2 billion to USD 106.1 billion. However, due to the Covid-19 pandemic outbreak in 2020, the market contracted due to declining demand and supply chain disruptions. Nevertheless, the market rebounded in 2021, growing by 12% to reach USD 104.6 billion, driven by the Asia-Pacific region. The market is expected to continue growing from 2021 to 2029, driven by the increasing usage of bearings in various applications such as mining, automotive, heavy machinery, infrastructure development, power generation and construction. It is forecasted that the global bearing market is expected to register a CAGR of 6% to 8% and will reach a value of USD 171.7 billion by 2029.

Indian Bearings Market

The bearings market in India is a significant player in the global and Asia-Pacific regions, accounting for a 5.2% share and a 12.5% share, respectively, in 2021. The market has experienced steady growth, with a CAGR of 7.2% between 2015 and 2019, but was impacted by the Covid-19 pandemic outbreak in 2020, causing a contraction. However, the market rebounded in 2021, driven by growth in the Asia-Pacific region, including India, and is expected to register a CAGR of 8.3% during 2021 to 2029, reaching

an estimated value of USD 10.3 billion in 2029. Despite this growth, there are potential challenges to the near-term growth prospects, such as geopolitical conflict threats and supply chain issues.

One key driver of growth in the bearing industry is global economic growth, which has led to increased demand for bearings across various sectors. Additionally, the rise in demand for customised bearings has spurred growth in the industry, as industries seek tailored solutions to meet specific requirements. The need for high-performance bearings has also driven growth, as manufacturers strive to produce bearings with greater durability and efficiency. Advancements in technology have enabled the production of more advanced bearings, contributing to growth in the industry. The expanding renewable energy market, particularly the wind sector, has also been a key driver of growth, requiring increasingly sophisticated bearings to support wind turbines.

As these drivers continue to propel growth in the bearing industry, manufacturers are expected to invest more in localising their products, further reducing imports and promoting domestic production. Overall, while there are potential challenges to near-term growth, the bearing industry is expected to continue growing, driven by a range of factors that are likely to persist in the long-term.

Overview of Global Stamping Market

Stamping is a metal manufacturing process that converts flat metal sheets into specific shapes and sizes. It involves various techniques such as blanking, coining, and bending. Stampers use computer tools to create designs. There are four major types of stamping: progressive die stamping, four-slide stamping, transfer die stamping, and deep draw stamping, which are chosen based on the product.

The global stampings market is expected to rebound and register a CAGR of 5.6% between 2021 and 2029, reaching a projected value of USD 307.5 billion by 2029. Despite a decline in the market in 2020 due to the Covid-19 pandemic,the rebound is driven by growth in stamping- related sectors, which are expected to perform better due to pent-up demand in the past years.

Firstly, the growth in customisation of stamping is likely to play a major role in driving demand for stampings.

With the increasing demand for customized products in various industries, the stamping market is expected to benefit. Secondly, the ease of application of stamping is another key growth driver. Additionally, the automation of the stamping process is anticipated to drive efficiency and reduce production costs. Overall, these growth drivers are projected to contribute significantly to the growth of the stampings market in the coming years.

Indian Stamping Market Overview

India is poised to become the leader in the Asia-Pacific regions stampings market with the highest CAGR, while the Asia-Pacific region is predicted to be the second- largest growing region in the global stampings market. The Indian stampings market has registered 5.9% CAGR from 2015 to 2019 and was valued at USD 11.4 billion in 2021. The market is expected to continue its upward trajectory, registering at a 7.4% CAGR between 2021-2029 to reach USD 20.2 billion by 2029. This growth can be attributed to the increasing demand for stamped components in various industries, adoption of new technologies, Government initiatives to promote domestic manufacturing, and the availability of skilled labour and low labour costs.

Overview of Global Solar Industry

The global solar energy systems market is experiencing significant growth and is expected to continue on this trajectory with a projected CAGR of 15.7% from 2022 to 2030. This market was valued at USD 160.3 billion in 2021, and the growing demand for sustainable energy production is a significant driver of this growth. As the costs of solar energy systems decline, they are becoming more competitive in the energy generation industry. High investments in solar energy technologies are anticipated to further reduce the prices of components, making solar energy systems more affordable than currently operating coal or gas power plants. The need to find alternative sources of power generation and to reduce dependence on fossil fuels is also projected to increase demand for solar energy systems.

(Source: https://www.grandviewresearch.com/industry-analysis/solar- energy-system-market-report)

Overview of Indian Solar Industry

India possesses a significant potential for solar energy, with around 5,000 trillion kWh of energy incident over its geographic area each year. Harvesting solar photovoltaic electricity can allow for massive scalability in India, particularly for rural electrification through off-grid, decentralised, and low-temperature applications. Solar energy-based decentralised and distributed applications have already benefitted millions of people in Indian communities, providing them with cooking, lighting, and other energy needs. These applications have also resulted in social and economic benefits, including reducing the burden on rural women and girls who have to travel long distances to collect firewood. Additionally, Indias solar energy sector has become a significant contributor to grid-connected power generation capacity, supporting the Governments objective of sustainable growth, while also ensuring energy security.

Company Overview

Harsha Group was incorporated in 1986 with the goal of providing businesses with engineering solutions and contributing to the realisation of engineerings full potential for society. Today, the Company has established itself as a leader in the Indian precision bearing cage manufacturing industry, commanding an impressive market share of ~ 5060% in the organised segment. Additionally, the Company holds a 6.5% market share in the global organised bearing cages market for brass, steel, and polyamide cages.

The Companys range of bearing cages is extensive, covering sizes from 20mm to 2,000mm in diameter. Its engineering product line includes brass cages, bronze bushings, sand castings, polyamide cages, steel cages, and stamped components. In the solar EPC business, the Company offers comprehensive turnkey solutions for all solar photovoltaic requirements.

As the need for bearings and their cages has increased over time and engineering has evolved, the Company has continued to serve its clients engineering needs with precision. With its in-house product development and innovation center, the Company has been able to develop over 1200 bearing types in last 3 years.


Global Precision Engineering Solutions Provider

The Company has a diverse product portfolio, manufacturing bearing cages in various sizes and materials. With efficient manufacturing processes and strong capabilities in new product development, they also produce precision components, welded assemblies, brass castings, and bushings. The Companys market reach spans over more than 31 countries across five continents, ensuring a well-diversified revenue stream both geographically and among customers.

Strong Partnerships with Global Bearing Manufacturers

The Company enjoys strong partnerships with prominent global bearing manufacturers in automotive, railways, aviation, construction, and other sectors. Its extensive experience, advanced manufacturing facilities, and commitment to quality have led to repeat orders and longterm agreements. With a focus on customer satisfaction and transparent dealings, it is able to cater to diverse requirements, develop new products, and expand into new geographies, endorsing its operational capabilities and attracting potential customers.

Proficiency in Tooling, Design Development and Automation

With decades of experience in precision engineering and strategically located production facilities, coupled with advanced manufacturing technology, the Company has successfully met the bespoke and stringent requirements of global customers. Offering full-service capabilities throughout the product cycle, including design, development, and manufacturing, it specialises in bearing cages, while also providing a diversified product portfolio of precision components, welded assemblies, brass castings, and bushings. Its market presence spans multiple continents, ensuring geographically and customer- diversified revenue streams.



The global shift towards reliable alternatives has presented a significant opportunity for manufacturing in India to thrive. As businesses worldwide seek more dependable options, India emerges as a favourable destination, poised to benefit immensely from this influx of companies.

This, in turn, leads to an increasing demand for precision engineering solutions.

Low-Cost Manufacturing

The Company stands to gain substantial advantages from the growing trend of bearing manufacturers shifting from Europe to India. This strategic move is primarily driven by the lower manufacturing costs in India, offering significant cost savings for these manufacturers. As a result, bearing manufacturers can ramp up their production levels, leading to an increased demand for bearing cages.

Rising Preference in EV

With the increasing adoption of electric vehicles (EVs), there is a substantial rise in the demand for customisable bearing cages and precision stamping. This surge in demand directly benefits the Company, as it possesses the ability to manufacture a diverse range of bearing cages ranging from 20 mm to 2,000 mm. Moreover, the Companys state-of-the-art in-house tooling and design capabilities, along with its utilisation of the latest machinery, further contribute to its competitive advantage.

Financial Overview

(Rs in lakhs)




For the year ended March 31, 2023 For the year ended March 31, 2022 For the year ended March 31, 2021 For the year ended March 31, 2023 For the year ended March 31, 2022 For the year ended March 31, 2021

Revenue from Operations

102,472 95,645 58,204 136,402 132,148 87,376

Profit Before Depreciation and Tax

19,561 16,261 6,869 20,324 16,199 9,482

Less: Depreciation

2,331 1,962 1,728 3,612 3,536 3,411

Profit for the Year Before Taxation

17,230 14,299 5,141 16,712 12,663 6,071

Provision for Taxation

Less: Current Year Tax

3,863 3,325 - 3.846 3,325 -

Less: Deferred Tax

528 366 1,343 538 143 1,528

Profit After Taxation

12,839 10,608 3,798 12,328 9,195 4,543

Add: Other Comprehensive Income for the Year

(748) 144 515 (748) 144 515

Total Comprehensive Income for the Year

12,091 10,752 4,313 11,580 9,339 5,058

Revenue from Operations

The Company witnessed a growth of 7.13% in standalone revenue from operations for the year 2022-23, with an increase from Rs. 95,645 lakhs in 2021-22 to Rs. 102,472 lakhs in 2022-23. Standalone revenue from operations in 2022-23 grew by 76.05% as compared to the year 2020-21.

Similarly, in terms of consolidated revenue from operations, there was a growth of 3.22% in 2022-23, as it rose from Rs. 132,148 lakhs in 2021-22 to Rs. 136,402 lakhs in 2022-23. Consolidated revenue from operations in 2022-23 grew by 56.10% as compared to the year 2020-21.

Profit After Tax

In the year 2022-23, the Company achieved a growth of 21.03% in standalone profit after tax, with an increase to Rs. 12,839 lakhs from Rs. 10,608 lakhs. Standalone profit after tax in 2022-23 increased by 238.04% as compared to the year 2020-21.

Furthermore, the consolidated profit after tax increased to Rs. 12,328 lakhs in 2022-23 from Rs. 9,195 lakhs in 202122, showcasing a significant rise of 34.07%. Consolidated profit after tax increased by 171.36% as compared to the year 2020-21.

Total Comprehensive Income

The Companys standalone total comprehensive income experienced a rise of 12.45%, increasing from Rs. 10,752 lakhs in 2021-22 to Rs. 12,091 lakhs in 2022-23. Standalone

total comprehensive income in 2022-23 increased by 180.33% as compared to the year 2020-21.

Similarly, the consolidated total comprehensive income grew by 23.99%, reaching Rs. 11,580 lakhs in 2022-23 from Rs. 9,339 lakhs in 2021-22. Consolidated total comprehensive income in 2022-23 increased by 128.94% as compared to the year 2020-21.

Financial Ratios (Consolidated)


2022-23 2021-22 2020-21

Current Ratio (Times)

2.90 1.64 1.43

Debt-to-Equity Ratio (Times)

0.17 0.74 0.83

Debt Service Coverage Ratio (Times)

8.36 2.26 1.34

Return on Equity Ratio


11% 17% 10%

Inventory Turnover Ratio (Times)

1.95 1.97 1.55

Return on Capital Employed (%)

17% 23% 17%

Net Profit Ratio (%)

9% 7% 5%

Risk Management

The Company has established a robust risk management framework that systematically identifies and evaluates business risks and opportunities. This framework aims to enhance transparency, minimise adverse impacts on the Companys business objectives, and strengthen its competitive advantage. It includes comprehensive documentation and reporting processes, ensuring a structured approach to risk management.

Within this framework, diverse risk models are employed to identify risk trends, assess exposure levels, and analyse potential impacts across the Company and its various business segments. This comprehensive approach enables the Company to proactively manage risks, capitalise on opportunities, and safeguard its operations, while maximising value creation.

Risk Identified

Impact on Company

Mitigation Strategy

Geopolitical Risks

Since early 2022, there has been a rise in geopolitical tensions in Europe, which has had a widespread impact on businesses worldwide, but particularly in Europe. As a result, the profitability of the Company is at risk due to the adverse impact on businesses in this region.

The Company benefits from a wide geographical presence and a diversified customer base, resulting in a diversified revenue stream. Furthermore, the Companys expansion plans are aligned with the evolving needs of its customers in India, Europe, Americas, and China. These plans include expanding its operations to further enhance its market reach and growth potential.

Shrinking Need for Traditional Internal Combustion Engines

With the increasing popularity of electric cars as a preferred mode of transportation, the automotive sector is undergoing a significant transformation. This transformation is leading to a decrease in the demand for internal combustion engines (ICEs). This trend is expected to continue and strengthen in the coming years.

Since the Company does not manufacture needle bearing cages, which are engine components, the rise in electric vehicles is not expected to have a direct negative impact on its business. However, the increasing demand for electric cars is creating a need for precision engineering solutions, which presents an opportunity for the Company to expand its market share. Additionally, the Companys stamping segment is expected to benefit significantly from the growth of the electric vehicle market.

Price Fluctuation of Raw Material Risk

Due to the volatile nature of raw material prices, the Companys profitability is directly affected by fluctuations in the cost of raw materials, which it procures.

To address the volatile nature of raw material prices, the Company has adopted certain measures. The Company procures raw materials from suppliers in the open market who meet the customers set standards. The Company prefers to maintain a flexible approach in its dealings with suppliers, refraining from entering into any long-term commitments or firm contracts. The Company also has set pass through mechanism for raw material with maximum customers..

Human Resource The Companys capacity to provide value The Company has adequate human

Risk is contingent upon its capability to attract, resources to sustain its current operations retain, and foster a skilled workforce. The and planned growth, particularly at the unavailability of the necessary talent pool management level. The Company is can have a detrimental impact on the committed to improving its operational overall performance of the Company. efficiency by reducing employee costs as a percentage of revenue from operations.

Foreign Currency The Company operates across multiple The Company enters into forward contracts Fluctuations countries through its export and import and premium paid long-term options activities, which makes it susceptible to contract to partly hedge its foreign currency currency fluctuations. Such changes in risks, exchange rates can potentially impact the pricing and profitability.

Competition Risk The Company is consistently subjected to Through consistent endeavours to competitive risks. The rise in competition augment the Companys brand reputation, can exert pressure on various aspects such with a particular emphasis on design, as profit margins and market share. quality, cost-efficiency, timely delivery, market share expansion, and exceptional customer service, the aim is to alleviate the associated risks.

Compliance Risk - Any failure to meet obligations can incur By consistently monitoring and

Increasing penalties as prescribed by applicable reviewing changes in the regulatory

Requirements provisions and regulations. framework, as well as conducting regular monitoring and reporting of compliance, the Company ensures adherence to regulatory requirements and maintains a proactive approach towards compliance management.

Operational Overview

The Company is the largest manufacturer of precision bearing cages in the organised sector and among the leading manufacturers of precision bearing cages in the world. The Company has the in-house expertise to design and develop advanced tooling which enables the Company to manufacture precision bearing cages and complex and specialised precision stamped components. The Company has been successful in diversifying its product portfolio and improve the current processes in different types of bearing cages mainly due to the design, development and technological capabilities.

The following are the highlights for the key products of Harsha Engineers:

? The Company has a significant market share in the bearing cage market and has successfully manufactured over 7,205 bearing cages along with 295


other products. Furthermore, the product development and innovation centre has developed more than 1,200 products across various bearing types in last three years

? Harsha Engineers specializes in producing bronze bushes that find primary application within the gearboxes of wind turbines, particularly in planetary axles. Our focus lies in advancing our expertise across various bronze alloys, with a specific emphasis on Aluminum and Tin Bronze.

Our company has successfully achieved proficiency in addressing the complete spectrum of bushes, covering a wide range of outer diameters (OD) and heights. Our capabilities extend from 200 mm to 600 mm OD and 200 mm to 800 mm in height.

? For the stamping and specialised component segment, the Company has set up a dedicated stamping unit and has installed certain machinery with tools for complex stamping at its primary manufacturing units. Further, it is in the process of developing complex compressor parts and certain other components which are used in the compressor industry and focus on manufacturing of bearing seals and stamping. The Company believes that collectively, these products offer opportunities for significant growth.

The Company has over 10 years of experience in the EPC business. The Company has in-house design, engineering procurement, project management and O&M team which has a combined experience of installing 500MW and more than 60MW commissioning experience in the roof top segment until March 31, 2023.

Human Resources

The Company recognises employees crucial role in shaping culture and achieving success. Aligning policies, initiatives, and training programmes with its Vision and Mission, it fosters a harmonious work environment. Valuing employees the Company provides competitive compensation, attractive benefits, and favourable conditions to motivate its workforce. It invests in engagement, communication, and involving them in decision-making to enhance value and reduce attrition. Through effective practices, leadership support, and employee management, the Company develops and optimises its human capital, benefitting both employees and the organisation. Unwavering commitment to employee engagement achieves goals for 2022-23. Successful knowledge enhancement, reskilling initiatives, and Internal IKVK, Multiskilling, and Leadership Development Team boost morale and efficiency.]


The Company is deeply committed to sustainability, integrating environmental, social, and governance principles into its business practices. In 2022-23, various initiatives were implemented to promote sustainability and responsible conduct. These included water conservation measures, tree planting, clean and safe workstations, carbon emission reduction through shared transportation, responsible sourcing practices, safety and health initiatives, and a focus on product material compliance and sustainability. These efforts reflect the Companys commitment to making a positive impact on the environment, society, and its stakeholders, while ensuring long-term success through responsible business practices.

CSR Initiatives

Though the establishment of Aastha Charitable Trust, the Company has established Anand Dham,a self-contained residential complex for mentally challenged individuals, which provides a safe, clean, and engaging environment with training, medical care, and a family-like atmosphere, ensuring lifelong support for residents.

Internal Control and their Adequacy

The Companys internal control systems are commensurate with the nature of its business and the size and complexity of its operations. Given the changing needs, the Company has deepened the focus on the function and enhanced the scope of the internal audit department and included areas establishing corporate governance policy, internal control framework, conducting internal audits, management audits, IT audits, drafting and implementing policies and procedures, complying with environmental laws, reviewing and reporting of statutory compliances. Accordingly, the function has been named Corporate Audit & Governance (CAG).

The Company follows a robust system of internal controls to ensure that all assets are safeguarded and protected against loss from any unauthorised use or disposition and that the transactions are authorised, recorded and reported quickly. It reviews the adequacy of internal control systems from time to time. The internal controls are designed to maintain the transparency and adequacy of the financial and other records, reliable resources for preparing financial reports and other data.

The Companys Audit Committee reviews the adequacy and effectiveness of its internal control environment and monitors the implementation of audit recommendations, including those related to strengthening the Companys risk management policies and systems.

Cautionary Statement

Certain statements in the MDA section concerning future prospects may be forward-looking statements which involve a number of underlying identified/non-identified risks and uncertainties that could cause actual results to differ materially. In addition to the foregoing changes in the macro-environment, a global pandemic like Covid-19 may pose an unforeseen, unprecedented, unascertainable and constantly evolving risk(s), inter-alia, to the Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based are also subject to change accordingly. These forwardlooking statements represent only the Companys current intentions, beliefs or expectations, and any forward-looking statement speaks only, as of the date on which it was made. The Company assumes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.