Lakshmi Machine Works Ltd Management Discussions.

Global economic overview

2017 was a year of new highs. The global economy, which staged a recovery from around mid-2016, gained significant momentum in 2017 to register a 3.8% growth, the fastest since 2011. The heartening feature was that 2017 ended on a high with the global GDP growth pegged at 4% for the last quarter (the highest since 2010) which also provided optimism for this momentum to be carried forward into 2018. This growth was driven by an investment recovery in advanced economies, continued strong growth in emerging Asia, a notable upswing in emerging Europe, and signs of recovery in several commodity exporters. Global growth is expected to tick up to 3.9% this year (2018) and next (2019), supported by strong momentum, favourable market sentiment, accommodative financial conditions, and the domestic and international repercussions of expansionary fiscal policy in the United States.

Indian economic overview

After a dull first half, the Indian economy gained momentum, reporting a GDP growth of 7.2% in the December quarter (Q3) of 2017-18—the fastest in five quarters. As a result, India reclaimed the ‘world’s fastest growing economy’ tag from China. This recovery was sparked by a revival in investment demand, registering a growth of 12%. Based on Q3 GDP data, the full year’s GDP growth is estimated to be 6.6%. If this GDP growth rate is realised, the Indian economy is projected to grow to US$2.6 trillion by the end of March 2018.

Not only does this signal that the Indian economy is tiding over disruptions – triggered by demonetisation of high-value currencies and rollout of the Goods and Services Tax-but the latest quarterly corporate earnings data suggest that consumer demand too is reviving.

The Company provides the entire range of spinning solutions to its domestic and international clients. Its ability to stay at the cutting-edge of technology ensures that its sophisticated equipments generate quality output consistently, even while making its client’s business competitive. The Company remains connected with its customers by offering a comprehensive basket of value-added services that ensure optimum utilisation of the machine throughout its useful life.

The services basket includes hand-holding of the client’s shopfloor team post installation, machine monitoring and audit and providing spares and accessories for maximising machine uptime. The Company also offers performance improvement kits that can be retrofitted with legacy machines to improve their productivity and performance. The Company services its international customers through a network of offices in each geography of its presence, manned by local residents. This ensures that LMW is always proximate to its client’s shopfloor.

Highlights, 2017-18

Despite the subdued environment prevailing in the Indian spinning sector primarily due to the volatility in cotton prices, reduction in yarn import by China and the continuing overhang of the demonetisation driver, the Company improved its business performance by dispatching more machines and performance kits. In addition, the Company implemented a number of initiatives to strengthen its competitive advantage:

Operations l Reduced the lead time between order receipt and machine dispatch by accurate assessment of client requirement and intelligent production planning. l Implemented low-cost automation solutions, which reduced labour fatigue and improved shopfloor productivity.

R&D l Launched products that further reduced the cost of ownership and operations l Optimised product development time by increasing the proportion of standardised components l Automated manual material transfer between machines, thereby further enhancing machine productivity

Spares l Encouraged customers to use the e-spares portal for procurement of spares. Placed most of the parts under Stock and Sale category ensuring timely availability of spares. l Provided combo kits (sub-assemblies) which facilitated faster fitment (without damaging other complementary parts) and minimised the use of spurious parts.