lakshmi machine works ltd Management discussions

World Economy

According to the International Monetary Fund (IMF), global economic outlook is uncertain again given the financial sector turmoil, high inflation, geopolitical developments and tensions, and the COVID pandemic.

Geopolitical developments triggered high energy costs in 2022. Also, supply-side disruptions distorted consumer prices. As a result, unreasonable inflation prevailed across the globe - averaging around 9%. Majority of the global central banks tightened the monetary policy to restore price stability.

Outlook: The baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023, before settling at 3.0 percent in 2024.

Rising interest rates and the developments in Eastern Europe will continue to cast a grim shadow on global economic stability. On the positive side however, the reopening of Chinas economy, higher global demand and slowing inflation projected across certain countries in the year ahead have seemingly paved the way for a healthy recovery.

According to the World Bank, investment growth in emerging markets and developing economies is likely to remain below its average rate of the past two decades. Unforeseen adverse shocks could further pull down the global GDP. Smaller nations are particularly vulnerable to such shocks because of their reliance on external trade and financing, limited economic diversification, elevated debt, and susceptibility to natural disasters. In order to mitigate the risks of global recession and debt distress in emerging markets & developing economies and to support a major increase in investment, well-concerted global and national level efforts are necessary.

Indian Economy

India recovered from the pandemic in FY22 and positioned itself to ascend to the pre-pandemic growth path. According to the Economic Survey, the nominal GDP of India was estimated at US$ 3.5 trillion in March 2023.

During FY23, India faced challenges in reining inflation which was accentuated by the global geopolitical developments. The average retail inflation for FY23 was 6.7 per cent while in March 2023, the retail inflation came down to 5.7 per cent.

Indias Current Account Deficit (CAD) widened owing to high global commodity prices, the depreciation of the Indian Rupee and the increased quantum of imports to meet the requirements of a growing economy. Indias industrial output, as measured by the Index of Industrial Production (IIP), stood at 5.6 per cent on an annual basis in February 2023, according to recent National Statistical Office (NSO) data. That marked an improvement of 40 basis points sequentially, from growth of 5.2 per cent in factory output in January. The rise in industrial production was mainly driven by the manufacturing sector.

Given these developments, India with a GDP growth estimated at around 7.2% in FY23 retained its position as the fastest-growing major economy.

Outlook: India is expected to sustain a 6.5 per cent-plus GDP growth in FY24. The economic progress in FY24 will be supported by robust domestic demand and a healthy pick-up in capital formation.

The significant impetus to infrastructure creation in the Union Budget 2023 is expected to have a significant positive impact cascading on multiple sectors that support infrastructure creation. The visible challenges on the horizon are a global slowdown that could impede exports and persistently high inflation leading to continuing interest rate hikes by the RBI.

Business Division 1

Foundry Division

4,399	9,570.84
Castings sold (Tonnes)	Revenue (C in Lakhs)

Overview

Recognised as a leading global player in the textile machinery space, few would know that LMW commenced business operations by manufacturing castings. Over the years, the foundry division has emerged as the backbone of the Companys textile machinery and machine tools verticals, supplying them with high-quality, precision castings.

While one facility primarily caters to in-house requirements, the second facility develops complex castings used by marquee global and Indian OEMs in niche and critical applications across diverse sectors. A sizeable portion of these castings is exported to key markets in North America, Europe, and Asia.

By deploying advanced, sophisticated technologies and equipment and globally bench-marked operational processes, the division maintains a delicate balance between improved productivity and environmental protection, ensuring the business remains profitable and sustainable over the long term.

Business performance, FY23

The division continued to improve its performance barometer holistically. The operations teams at both units worked tirelessly to meet the growing demands of its internal and external customers. Meanwhile, the marketing team worked to ensure a continuous flow of orders. This combined effort resulted in a healthy order book which should facilitate robust business growth in the current year.

Improving plant operations: With growing demand, the team focused on effectively utilising its assets. It improved critical melting and moulding processes, which yielded satisfying results.

The team focused on standardising the metal charged for melting in the melting area, among other initiatives. This reduced the melting time per batch and improved the quality of the final output.

In the moulding area, the team suitably altered the moulding plan and throughput for every moulding line to maximise their utilisation. The division invested in automation solutions at its moulding units to improve efficiency and overall productivity.

These efforts worked effectively in scaling up the output of the foundry division.

Market place development: The business development team sharpened its focus on ensuring the continuous flow of orders.

The team adopted a two-pronged approach. One, it strengthened relations with existing customers and nurtured new relations in existing sectors. Two, it made a concerted effort to widen the divisions presence in new business spaces.

The team established meaningful relations with new customers in the renewable energy and compressor business spaces. These new opportunities promise to provide adequate business visibility for the current year and beyond.

Focus on the environment: FY23 provided a satisfying milestone for the foundry division as its efforts towards environment management earned it national respect.

The division received the GreenCo Platinum Certification, Indias highest recognition for environmental management. This certification positions the foundry as the most environment-friendly foundry in India. In line with its commitment to optimising resources, the division reduced its energy consumption by tweaking its melting process.

Prospects for our business space

Many people know that manufacturing is essential, but only a few know how vital the foundry industry is. Its responsible for producing base parts that fuel everyday life and the economy.

Metal castings are part of every automobile, every railway car and engine, every building and every piece of heavy equipment used for construction and agriculture, and much more.

Casting is most often used for making complex shapes that would be otherwise difficult or uneconomical to make by other methods. Hence, castings are indispensable components essential for a nations economic progress.

Long-Term Prospects: The global metal casting market was valued at US$ 139 billion in 2021. This market is projected to reach US$ 221.3 billion by 2027, showing a CAGR of 7.8% during 2022-2027.

India is the worlds third-largest casting producer after China and the United States. The Indian foundry industry manufactures metal cast components for applications in Auto, Tractor, Railways, Machine tools, Sanitary, Pipe Fittings, Defence, Aerospace, Earth Moving, Textile, Cement, Electrical, Power machinery, Pumps / Valves, Wind turbine generators, etc. Foundry Industry has a turnover of approx. US$ 19 billion with exports of approximately US$ 3 billion. Generally, grey iron castings have a significant share, i.e., about 68% of total castings produced.

There are approximately 4,500 foundry units in India, out of which 90% can be classified as MSMEs. About 1,500 units have International Quality Accreditation. Several large foundries are modern & globally competitive. Many foundries still use cupolas using low ash metallurgical coke. However, of late, foundries are switching to induction furnaces due to growing environmental awareness.

At LMW, most of the castings produced are used in-house in other business verticals. Besides, the division manufactures complex castings used in niche sectors such as aerospace, renewable energy, railways, construction & mining, power & energy, and automobile. Hence, it would be relevant to delve into the prospects of these sectors to gauge the opportunity horizon for LMWs foundry division.

Automotive: According to an India Brand Equity Foundation Report, the Indian passenger car market, which was valued at US$ 32.70 billion in 2021, is expected to reach US$ 54.84 billion by 2027, registering a CAGR of over 9% between 2022-27. The electric vehicle market is estimated to reach US$ 7.09 billion by 2025. Given the immense growth potential for electric vehicles in India and globally, sizeable investments are expected to set up vehicle manufacturing and the related charging infrastructure in India.

Renewable energy: India ranked 3^rd in the renewable energy country attractive index in 2021 and is the 3^rd largest energy-consuming country in the world. India ranks 4^th globally in Renewable Energy Installed Capacity (including Large Hydro power generating capacity). It ranks 4^th in Wind and Solar Power capacity (according to the REN21 Renewables 2022 Global Status Report). The country has set an ambitious target to achieve a total of 500 GW worth of renewable energy by 2030, the worlds most extensive expansion plan in renewable energy.

Petrochemicals: The petrochemical market in India is forecasted to expand at a CAGR of 6.14% between FY 2021 and FY 2025. This will necessitate considerable investments by Indian oil majors to increase their refining and distribution infrastructure to meet the growing domestic demand for fuels. Therefore, the petrochemical industry will positively impact the industrial landscape.

Urban public transport: The Metro-rail revolution is happening in India, with the number of cities having this transport network rising to 20 from five in 2014. The ubiquitous Metro trains running along the landscape of Indian cities are steadily emerging as one of the best solutions for urban transportation. As per a recent study by ICRA, the Indian metro projects are expected to generate C80,000 Crore opportunities for construction companies over the next five years, a part of which will also cascade to the casting sector.

Defence: The Defence Production and Export Promotion Policy 2020, released by the Ministry of Defence, is a guiding document to facilitate the Governments "Atmanirbhar Bharat" initiative. This policy targets generating revenue worth C75,000 Crore, including C35,000 Crore in the aerospace/defence products and services space by 2025.

The Budget impetus: The Union Budget 2023 announced initiatives and capex for housing, transport and urban infrastructure development. The ministries of housing and urban affairs (MoHUA) and railways combined will see a capex surge of INR 3.2 trillion in FY24.

The Railways has been given its highest-ever capital expenditure allocation, of C2.4 trillion in FY24, for 100 transport infrastructure projects.

An C10,000 Crore Urban Infrastructure Development Fund (UIDF) will be established to transform urban planning and make cities more sustainable.

Our blueprint

Having delivered a robust performance in FY23, the division has set ambitious goals for the current year that will enable the division to increase the manufacturing capacity by introducing contemporary technology wherever necessary to optimise energy consumption further and increase productivity. The additional capacity would be primarily used for catering to external customers. The division would also during FY24 be looking at solutions that further optimise its impact on environment.

Business Division 2

Textile Machinery Division

4,201	3,48,698.67
Machines Sold	Revenue (C in Lakhs)

Overview

The Textile Machinery Division bears testimony to the Companys dream of an ‘Atmanirbhar Bharat decades before the Government articulated it as its vision.

The division offers an entire range of spinning solutions in multiple variants to fit the requirements of diverse entrepreneurs and organisations. LMW manufactured textile spinning machinery has been pivotal in establishing India on the global textile map. The division also exports its machines to multiple global destinations.

In India, the division has an entrenched network of technical experts who service the clients, ensuring minimum equipment downtime. In addition, the division services its international customers through a network of offices in each location, ensuring that the division is always proximate to its customers shop floor.

The division deploys cutting-edge technology to make the machines more capable, self-sufficient and relevant to global standards. It also leverages digital technology to increase its proximity to its customers - in India and worldwide. Its digital solutions enable the technical team to deliver solutions to customer issues remotely.

Business performance, FY23

FY23 was a landmark year for the division as it set a landmark in revenue generated and the topline growth. These milestones were owing to the healthy order book position at the end of the previous financial year. Order flow was satisfying for the first half of FY23 but tapered after that, owing to a slump in the global textile industry. However, the last quarter saw a revival in business prospects with a pick-up in order inflow. As a result, the division expects to sustain business growth in the current year.

Improving plant operations: Even as customers continued taking delivery of their ordered machines right through the year, the division experienced significant challenges with sourcing mechatronics that are critical to its machines. The team leveraged its healthy vendor relations to sustain supplies of these components.

The division invested in capex to debottleneck its lines and automation solutions to facilitate optimum utilisation of assets. This investment increased the throughput of components to its assembly lines and allowed the division to deliver a record number of machines during the period under review.

The division intensified the technical training of its shopfloor team to enhance their skill and capabilities, which also helped in improving shopfloor efficiencies. In addition, it continued to aggressively mitigate customer issues and ensure they did not recur. The efforts resulted in a significant drop in quality issues.

Strengthening the quality commitment: The division shifted its approach towards quality from the conventional inside-out policy (drawing-accuracy approach) to an outside-in (customer-centric approach) mindset.

In keeping with this change, the division significantly adopted a three-pronged approach 1) Vendor Quality, 2) Assembly Quality 3) Service Quality to strengthen its quality commitment.

Widening the product basket: The R&D team made some critical breakthroughs that promise to strengthen the divisions standing in the textile sector. Upholding the spirit of ‘Atmanirbhar Bharat, the team strives to develop 100% indigenous solutions that offer the best value for money proposition to the customers. For example, it launched the Card Drafting System, besides other improved product offerings. This solution will shorten the preparatory process for Vortex spinning . It also launched a new variant of the Twin Delivery Draw Frame, reducing the required space and hence the cost of ownership for the customer. Besides improved products, the R&D team also focused on providing more automation solutions to the customer with considerable success.

Increasing growth opportunities: Other than the third quarter of FY23, the market dynamics were largely favourable, sustaining the inflow of growth opportunities from domestic and international markets.

The international markets were advantageous as business orders transformed from unitary machines in earlier years to project orders comprising the entire fleet of spinning equipment. This change showcased the global customers growing trust in the LMW brand. The division strengthened its presence in existing global markets and entered new and exciting markets during the year under review.

The division participated in the India International Textile Machinery Exhibition in December 2022, held after six years owing to the disruption due to Covid-19.

The division continued its aggressive outreach efforts using all the available digital platforms with considerable success. The posts on social media handles showcased new machines and spares, performance enhancement kits and customer success stories.

Strengthening the service: As machine deliveries scaled, the division increased the headcount of its services and installation team to facilitate faster installation. Additionally, the division increased its focus on high-quality installation and seamless handover of machines to clients. Specially created teams swiftly responded to all technical issues and offered life cycle support to customers.

The division also strengthened its customer relationship/ outreach exercise through a globally connected digital platform allowing customers to interact directly with the team to put up service requests and communicate all kinds of issues faced. The service team of the division then addressed these issues. This platform helped the division gain a direct pulse of its customers. This platform will also allow customers to purchase spares and accessories online. This feature should help boost the sale of spares and accessories in the current year. Moreover, the division will also feature all its marketing campaigns on the digital portal to spread awareness.

Focusing on the environment: All machines manufactured by the division are energy efficient. The division has also developed and delivered machines that allow customers to utilise yarn from recycled fabric – an emerging operating model in the global and domestic textile universe. Through these realities, the division is helping customers to participate in the global circular economy and move closer to their environment management goals.

Internally, the division has undertaken several initiatives toward reducing its carbon footprint. All its mother machines are fitted with energy monitoring devices, which allows it to monitor energy consumption and reduce it in a phased manner. In addition, the division has replaced its shopfloor lighting with LED variants. Further, the team has modified fixtures to optimise the shop floors energy consumption wherever possible.

The team has altered its packaging material. It has replaced natural wood with high-strength corrugated board and plywood wherever applicable. Moreover, the team observes one day every month as a Tree Planting day – this effort has resulted in planting about 2,000 trees within its campus in FY23.

Prospects for our business space

The domestic textile sector is critical to Indias progress owing to its contribution to economic growth and foreign currency earnings, and the creation of employment opportunities. As a result, the Government has focused on strengthening the sector by announcing favourable policies and creating opportunities for widening and strengthening the global presence of the Indian textile sector.

Policy intervention: The Government has introduced various schemes such as the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS) and Mega Integrated Textile Region and Apparel (MITRA) Park scheme. The Government allows 100% FDI in textiles. It has also announced the Production-linked Incentive (PLI) Scheme worth C10,683 Crores (US$ 1.44 billion) for five years for man-made fibres and technical textiles. These policy incentives have gone a long way in strengthening the capability matrix of the domestic textile sector to bring it to par with global standards.

The Ministry of Textiles has declared that the Government intends to establish 75 textile hubs in the country.

Opportunity creation: In 2022, the Government successfully endorsed Free Trade Agreements (FTA) with significant markets such as the UAE and Australia. Moreover, the Government is at an advanced negotiation stage with the UK and Canada for signing FTAs. These agreements create a level playing field for textile and garment exports from India. Due to its competitive advantages in the textile sector (strong raw material base, abundant labour and product quality), India is expected to edge out the competition in the global arena.

Union Budget 23-24: The total allocation for the sector is an impressive 22.6% higher than the previous years Budget and shows the Governments commitment to aiding the sectors growth. Additionally, funds have been allocated towards various programs to promote capacity building and investments in this area. This financial support should create a favourable environment for the continued success of Indias textile industry.

Large yarn manufacturers are expanding their spinning capacity to address the surge in demand for yarn over the next 3-5 years. Also, due to a positive outlook for the textile sector, fresh investments coming into India should create new spinning units shortly. These realities will augur well for the divisions business prospects in future.

Cotton

India has the distinction of having the largest area under cotton cultivation, with about 38% of the worlds area. India is also one of the largest producers of cotton in the world, accounting for about 23% of the worlds cotton production. However, the kilograms per hectare yield, presently at 465 kilograms/hectare, is still lower than the worlds average yield of about 755 kilograms /hectare.

Cotton season 2022-23: The Cotton Association of India (CAI) has estimated the cotton crop output at 330.50 Lakh bales for the 2022-23 season (307.05 Lakh bales for the cotton season 2021-22), a drop of 9.25 Lakh bales from its earlier estimate for the same period due to decline in output in Maharashtra, Andhra Pradesh and Karnataka. As a result, the cotton supply till the end of the cotton season 2022-23, up to 30^th September 2023, is estimated at 374.39 Lakh bales.

Budget support for Cotton: Extra Long Staple Cotton (‘ELS) usually comprises 32 to 36 mm in staple length. However, much of the cotton output in India is between 26 to 30 mm. Of this, almost 80% is 29 mm and is medium-grade. In India, domestic consumption of ELS cotton is about 10 Lakh bales, whereas the nation produces an estimated 3.5-4 Lakh bales. The Union Budget 2023-24 has proposed to enhance the productivity of extra-long staple cotton output by adopting a cluster-based and value-chain approach through Public Private Partnerships. Increased availability of right type of cotton is expected to provide increased impetus to yarn manufacturing activity within the country.

Our blueprint

The division plans to improve shopfloor efficiency and productivity further to get a more significant number of machines manufactured, shipped and installed in India and key international markets. Also, the team will launch the new machines displayed at the India International Textile Machinery Exhibition in the current year. These efforts are expected to help the division perform robustly during FY24.

Business Division 3

Machine Tool Division

3,519	77,918.64
Machines Sold	Revenue (C in Lakhs)

Overview

LMW, a recognised name for CNC machine tools, offers a wide range of CNC lathes and machining centres to respected names in Indias manufacturing space.

Established in 1988, the Machine Tool Division (MTD) is the first-of-its-kind manufacturing facility that develops and delivers Turning Centres, Machining Centres and Turnmill Centres . The division also offers an entire range of quality spares that enable the flawless performance of machines across their useful life. Further, the divisions after-sales services maximise machine uptime for the customers.

The division takes pride in remaining at the cutting edge of technology, which helps the division design and develop technology-based machines with niche capabilities for demanding applications.

Business performance, FY23

The division reported a good performance, with the team continuing its hard work in growing the opportunity landscape and capitalising on growth prospects. The number of machines sold continued to scale to new heights. Moreover, the team also successfully increased the proportion of machining centres in its sales mix. The division introduced and aggressively marketed the new launches to secure a healthy order book at the close of FY23. This business visibility for the current year enhanced the zeal and energy of the team to enhance productivity and efficiency.

Improving plant operations: The excitement on the shopfloor continued from the previous year as the team ideated and implemented initiatives to improve productivity and product quality.

The team focused on standardising components and modules across its machine variants – this helped in faster assembly operations and minimised inventory. In addition, the operations team strengthened its ‘auto mode manufacturing strategy, which helped speedier delivery to customers.

The division made considerable headway in its journey towards graduating to Smart Operations. It connected all the machines on the shopfloor leveraging the IoT platform, which helped monitor the entire shopfloor and the productivity and efficiency of every machine individually.

The highlight for FY23 was the establishment of the MTD divisions new unit in January 2023.

Widening the product basket: The R&D team continued to invest its energy in existing product improvement and new product development. The team made considerable headway in both areas, which helped the division to plug in most of the gaps in its product basket - it developed new machines; it displayed some of these new developments at the exhibitions. Further, the division continued to extend the applicability of its widely accepted J-series.

The team successfully developed a new machine in the Horizontal Machining Centre segment. This new product bridges the gap between LMW and other players operating in India in this space and promises to generate considerable interest among users in the current year.

Increasing growth opportunities:

The team participated in exhibitions to showcase its product – the most prominent was the IMTEX exhibition, which happens once every two years. Twelve new products were displayed; some were completely new products. Some of the new introductions enabled the division to establish a healthy presence in new user sectors, namely electronics and alloy wheels, among others.

The division launched multiple variants of the J-series to widen the application matrix of this machine and rejuvenate the healthy customer response received for this series in the previous year. The J-series allowed the division to establish a foothold in the die-moulding sector – a new opportunity space.

The division successfully launched the Smart Mini Master

(a compact and highly productive machine) – the team leveraged this new variant to make healthy inroads into the bearings sector.

Strengthening the service: In the Machine Tool division, the sale of the machine is just the start of a multi-decadal relationship cemented by prompt and efficient service. Cognizant of this reality, the division continued to strengthen its service platform.

The division implemented a completely digitised platform which facilitated customers to reach the division faster and enabled the team to track and resolve every customer issue quicker and more efficiently.

The division also created new service offices proximate to the user clusters. In addition to faster services, these offices will supply spares to the divisions customers.

Additionally, the division more than doubled its service locations in India and its service team to seamlessly manage its growing customer base. The division also strengthened the capability of its customer cell, which reduced the customer waiting time on calls and allowed the team to answer many more customer calls with ease.

Focusing on the environment: The division worked on reducing its carbon footprint. It implemented various initiatives to optimise energy consumption at its units. It sharpened the monitoring of energy-use across its facilities to plug wastages.

Prospects for our business space

Machine tools enable the manufacturing sector to deliver components and products to the highest possible specifications. They provide the basis for precision manufacturing. As a result, almost every segment of the manufacturing sector uses machine tools.

Macro outlook: According to the Economic Survey of India, the country has the unique opportunity to emerge as a global manufacturing hub in the next 8-10 years as multinational companies continue to remodel their manufacturing operations and supply chain to withstand the recent geopolitical developments.

The survey mentions three critical assets that will assist the nation in capitalising on this unique opportunity:

1. The potential for significant domestic demand.

2. Measures by the government to encourage manufacturing.

3. A distinct demographic edge.

To further enhance Indias integration in the global value chain, ‘Make in India 2.0 now focuses on 27 sectors, including 15 manufacturing and 12 service sectors, including furniture, agri-produce, textile, robotics, televisions and aluminium. In addition, intending to promote the Make-in-India programme, the government has launched the PLI (production-linked incentive) scheme for 14 sectors. These pathbreaking initiatives will scale Indias manufacturing capacities and capabilities, which promise significant opportunities for the machine tool sector over the coming years.

The India machine tools market size was US$ 1.4 Billion in 2022. As we advance, estimates suggest the market size will be US$ 2.5 Billion by 2028, registering a growth rate (CAGR) of 9.4% from 2023-2028. This growth will come primarily from some key user sectors.

Automotive and Auto Component sector: The domestic automotive industry witnessed a healthy revival in 2022, owing to a recovery in economic activities and increased mobility. ICRA expects Indias automotive industry to grow at a high single-digit rate in 2023-24. The key demand drivers for achieving this growth will be the growing working population and expanding middle class.

Electric vehicles (EV) open a new vista of growth for the automotive sector. About 4 million EVs should feature Indian roads by 2025 and 10 million by 2030, expanding the market size to US$ 206 billion by 2030.

India is emerging as a global hub for auto-component sourcing. As a result, auto component exports will grow and could reach US$ 30 billion in FY26.

Furthermore, Production Linked Incentive (PLI) schemes on automobile and auto components are estimated to bring a capital expenditure of C74,850 Crores. These estimates suggest significant demand from the automotive and auto-component sectors in the coming years.

Aerospace & defence: In its unwavering aim to emerge as ‘Atmanirbhar Bharat, India has shifted its strategy in the Aerospace & Defence Sector (A&D) towards ‘Make-in-India and further envisioned itself as a global manufacturing hub with ‘Make-in-India for the World.

Electricals & electronics: With per capita disposable income and private consumption doubling in the past few years, India has emerged as one of the worlds largest markets for electronic products. India also ranks in the top three global economies in terms of the number of digital consumers. A Ministry of Electronics and Information Technology (MeitY) document mentions that Indias electronics manufacturing industry can reach more than US$300 billion worth of electronics manufacturing and exports by 2025-26 from US$74.7 billion in 2020-21.

Our blueprint

The division will focus on sustaining its growth momentum in the current year. The operations team would focus on maximising the output from the new unit that commenced operations. It would also focus on further increasing the standardisation of components between machines, which benefits the customer and the division. The operations team would also work on aligning operations to the digital platform to transform its operations into Smart Operations.

The division will refine its product development strategy in line with its newly coined 4P concept – Precision,

Performance and Productivity of the Companys products leading to Prosperity for the customers business, the organisation, and all stakeholders, including the environment.

The business development team would work aggressively on creating awareness for its new product launches, focusing on growing the volumes for machining centres. The team would also focus on strengthening its presence in new user sectors that were tapped in FY23. Additionally, the team would work towards widening its service spread and increasing the team to improve service efficiency.

Business Division 4

Advanced Technology Centre

11,074.93

Revenue (C in Lakhs)

Overview

LMW established the Advanced Technology Centre (ATC) by leveraging its engineering expertise and passion for quality to develop components, sub-assemblies and modules for the highly stringent and demanding aerospace sector.

The Companys world-class manufacturing facilities house highly sophisticated equipment sourced from global leaders. Its processes align with the criteria specified for AS 9100D certification and NADCAP certification for special processes like chemical processes, NDT, welding, heat treatment and composites.

The divisions composite facility has international-class processing and assembling facility to deliver a wide range of composite and hybrid components and sub-assemblies that adhere to global quality protocols.

ATC has successfully delivered complex components and sub-assemblies made from multiple metals and composites to leading OEMs in the US and Europe. It also works with various government agencies and other aerospace companies based In India.

Business performance, FY23

FY23 was an important milestone for the division as it turned around – registering a positive bottom line. It was a heartening reward for the efforts of the entire team. The turnaround in business fortunes transpired as the division received firm orders from its global aerospace customers for components developed in earlier years. This visibility facilitated accurate planning and seamless operations.

The metallics unit witnessed sizeable orders as the aerospace sector experienced favourable tailwinds. Since most of the orders were repeat orders, set parameters and established processes resulted in efficient operations and superior productivity.

The composites unit, which commenced operations in 2019, worked on developing tailor-made components as required by the aerospace industry. The successful development of the same will result in repeat business for the current year and beyond.

Prospects for our business space

Global Aerospace Sector: The global aerospace market increased from US$261.12 billion in 2022 to US$278.43 billion in 2023, registering a compounded annual growth rate (CAGR) of 6.6%. The aerospace market is estimated to grow at a CAGR of 6.5% to US$ 358.44 billion in 2027.

The overall economic growth of emerging economies is expected to impact the commercial aircraft manufacturing market positively. Rising disposable incomes from economic growth in emerging markets have increased the demand for air travel manifold. The recent historic India-based airline aircraft orders are testimonies to this trend.

Developed economies are also expected to witness stable growth during the forecast period. Moreover, the European geopolitical crisis has pushed several developing nations to channel financial resources into beefing up their nations security infrastructure – a significant share of these funds is expected to go into defence aerospace.

Indian Aerospace sector: The Indian Air Force (IAF) is in the process of addressing the issue of the depletion of its fighter aircraft squadron strength. Besides the Light Combat Aircraft (‘LCA) jets order, the IAF plans for the procurement of 114 multi-role fighter jets. This would arrest the dwindling fighter strength of the Indian Air Force and enable it to reach the sanctioned strength of forty-two squadrons.

Moreover, the Governments increasing thrust on indigenisation is expected to open many opportunities for the division going forward.

Our blueprint

The division has successfully established itself as a capable and dependable player in the aerospace sector. Global aerospace players have evinced an interest in working with the division. This is reflected in orders from international marquee brands for its metallics and composite units. As a result, the division remains singularly focused on reaching out across the aerospace sector, in India and worldwide, to secure opportunities with a skew towards high-value addition.

The operations team will singularly focus their energy on developing and delivering components as per committed timelines. Moreover, the zeal and energy to sustain the momentum are palpable, with prospects and outcomes turning positive.

This should see the division making a more significant contribution to the Companys growth and profitability in the coming years. Sustainability will also continue to remain one of our key priorities.

Human Resource

The Company enjoys the support of a committed and well satisfied human capital. Compensation packages offered by the Company, best-of-class methods in recruitment, training, motivation, and performance appraisal, attract and retain the best talents. These practices enable the Company to keep the attrition rate well below the industry average. The Company had 3,418 permanent employees as on 31^st March 2023.

Key initiatives during FY23

Business Excellence Drive: The Business Excellence Drive, initiated in FY22, was further improved in FY23 to ensure the sustainability and growth of the organisation. Annual as well as 3-year objectives were set as a part of this transformative drive encompassing Total Employee Involvement (TEI), Kaizen, Statistical Quality Control, Statistical Process Control, Quality Control Circles (QCC) and Quality Improvement Projects. The drive improved the business review system and the PDCA (Plan, Do, Check, Analyse) approach being followed in the Company.

System automation: The team automated the HR systems on a contemporary dynamic HRMS platform. This allowed team members to access all HR related information on the portal or through the mobile app. The team also integrated its e-learning module with the new platform.

Digital skills: In addition to its intensive knowledge and skill development programs, the HR team tied up with NASSCOM to enhance the digital skill of employees. Training was provided on new age technologies such as AI, Machine Learning, IoT and Block Chain.

Further, as the organisation aspires to transition into a smart enterprise, all employees were educated on digital adoption and transformation.

Leadership development: The HR team initiated a theme-based leadership development program for first-time managers and experienced managers. Class-room training was complemented with on-field projects to embed the new knowledge.

Organisational structure: The HR team focused on reimagining and realigning the organisation in light of the changes that are transpiring in the organisation.

Total Employee Involvement: The Industrial Relations team implemented this initiative to foster employee engagement and instill a culture of continuous improvements in products, services, processes and practices. Multiple programs were created for staff (Kaizen and Cross Functional Teams) and workers (Suggestion Scheme and QCC). The goals set under each scheme were successfully achieved which made an appreciable contribution to improving efficiency and productivity of business operations. The Company also participated in the National QCC competition and received multiple awards.

Risk Management

The Company has adopted a comprehensive and integrated risk appraisal, mitigation and management process. The risk mitigation measures of the Company are placed before the Board periodically for review and improvement.

Internal Control System and Adequacy

The internal control mechanism of the Company is well documented. This is embodied in the Oracle E-Business Suite. It is a common practice in the Company to lay down well thought out business plans for each year.

From the annual business plan, detailed budgets for revenue and the capital for each quarter is determined.

The actual performance is reviewed in comparison with the budget and deviations, if any, are addressed adequately.

The Company also has an internal audit system commensurate to the size and volume of the business. The internal audit programme covers all the functions and activities of the Company. A statutory compliance audit team is constituted to check compliance in all areas and reports to the management. This facilitates corrective measures to be taken efficiently and wherever required.

The Audit Committee of the Board of Directors meets every quarter to review the reports of the Internal and Statutory Audit and to verify all financial statements, ensuring compliance.

Movement in Key Ratios

On account of increase in turnover by 48% in FY 2022-23, the net profit margin ratio has been increased from 5.96 % in FY 2021-22 to 7.86% in FY 2022-23. The return on capital employed also increased from 11.80% in FY 2021-22 to 20.67 % in FY 2022-23. Return on equity increased from 9.54% in FY 2021-22 to 16.35% in FY 22-23, debtors turnover has been increased from 11.89 in FY 2021-22 to 14.15 in FY 2022-23, the inventory turn ratio has also increased from 7.34 in FY 2021-22 to 7.81 in FY 2022-23. Current ratio increased from 1.50 in FY 2021-22 to 1.58 times in FY 2022-23 on account of increase in operations.

Financial Performance (C Lakhs)

Particulars	2022-23	2021-22
Gross profit before interest depreciation and tax	55,884.19	29,276.55
Interest	-	-
Depreciation	7,343.04	5,581.90
Provision for Tax	13,519.60	5,727.04
Profit after Tax	35,021.55	17,967.61
Earnings per share (Amount in C)	327.82	168.19

Cautionary Statement

This document contains statements about expected events and financial and operational results of the Company which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is a significant chance that the assumptions, predictions and other forward-looking statements may not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, and actual results and events to differ materially from those expressed here.

Social Initiatives

At LMW, we are fully aware of the importance of collaborating with our local community and supporting initiatives that enhance the well-being of our fellow citizens. We are determined to make a positive impact by partnering with organisations and projects that prioritise health and safety, village livelihood development, and provision of rural infrastructure. Through our diligent efforts, we aim to interact with the community, comprehend their concerns, and work collectively to create constructive change. We take pride in being part of a helpful and compassionate community and will persistently work alongside them to enhance the lives of people around us.

I) Health and Safety

Spine injury surgery & rehabilitation: LMW collaborates with leading hospitals and rehabilitation centres to help patients from lower economic backgrounds undergo treatment for burn injuries and reconstructive/spine injury surgery. LMW has supported treating twenty-seven patients during the year 2022-23.

Sickle Cell Anaemia Screening & Prevention Project: LMW, in partnership with the Nilgiris Adivasi Welfare Association (NAWA), organises the Sickle Anaemia Screening and Prevention Project in the tribal locations of Anaikatti, Palamalai and Karamadai areas of the Coimbatore District. The identified patients are provided with the required nutritional supplements and medicines. Also, appropriate counselling & awareness camps were conducted for persons diagnosed with Sickle Cell traits. LMW has supported forty Sickle Cell Anaemic patients and two hundred and ten persons with Sickle Cell traits through this project during 2022-23.

Type-1 Diabetes Intervention Project for Children:

LMW supports initiatives supporting children from economically weaker sections of society diagnosed with Type-1 Diabetes. Children with this medical condition require insulin administration depending on their blood glucose levels. A glucometer, insulin cartridges and consumables for one year were provided to the children through this project. The Company supported thirty children through this project during 2022-23.

Road Safety Campaign & Awareness Program: LMW collaborates with UYIR Trust, Coimbatore, to promote road safety awareness campaigns to prevent road traffic accidents in Coimbatore.

II) Village livelihood development:

Livelihood enhancement program: Fifteen income generation training programs for tribals were conducted in Chinna Jambukandi, Arakadavu, Munukuttai, Manguzhi, Pasumani Pudur, Baralikadu, Puchimarathur, Kuttaikadu, Aanaikatupathi, Nellithurai, Perukaipathi, Padhuvampalli, Thuvaipathi, Gopanari, Pillur and Thaneerpandal villages located in the Coimbatore District.

The Company has actively assisted the villagers in obtaining financial subsidies from the Mahalir Thittam & Tamil Nadu Rural Transformation Projects of the Tamil Nadu government through the Self-Help Group (SHG) model. Through this assistance, fourteen SHGs received total support of Rupees Eleven Lakhs as loans/ grants benefitting eighty-eight individuals.

Veterinary check-up camps: Animal husbandry is one of the major livelihood activities of people residing in the tribal villages of Palamalai & Anaikatti in the Coimbatore District. Around one hundred thirty-four veterinary health check-ups and vaccination camps were conducted in association with Tamil Nadu Animal Husbandry Department.

III) Rural Infrastructure Development

During the year under review, the Company undertook various rural infrastructure development activities in Coimbatore District, namely:

Solar lights: To improve basic facilities in the tribal villages of Anaikatti Hills, fifty solar streetlights were installed during the year under review. Besides this, the Company has also provided solar lighting systems for twenty homes.

School Infrastructure Development: LMW has supported the development of infrastructure facilities in rural government schools. School building repair, painting, laying floor tiles in classrooms & veranda, restroom renovation, and provision of computers and equipment for smart classrooms are done through this project. During the year under review, the following schools were covered through this initiative:

1. Panchayat Union Primary School, G.Goundampalayam

2. Panchayat Union Primary School, Medur

3. Panchayat Union Middle School, Vellingadu

4 .Anganwadi, Moppiripalayam

5. Anganwadi, Kasthuripalayam

Support for Housing Project: LMW has contributed towards constructing individual houses for sixty-four beneficiaries in Moongil Madai Kutai Tribal village near Alandurai under the Tamil Nadu Urban Slum Clearance Board project.

Solar Water Pumping System: LMW has installed two 15Kw capacity solar power generation systems in Thaneerpandal and Unjjampalayam villages in Kaniyur Panchayat for operating the water distribution systems in each of these villages.

Individual Toilets Construction: The Company actively supports the ideals of the Swachch Bharat Mission and has during the year under review supported in construction of individual household toilets for forty-one beneficiaries living around Periyanaickenpalayam area in Coimbatore District.

Medical Equipment supply to Government Hospitals: A digital radiography machine, X-ray table, chest stand, lead barrier and other accessories were provided to the Government Hospital in Periyanaickenpalayam, Coimbatore District. Also, the existing X-ray room was renovated to meet the required standards.

Environment

The Company is aware of its role in protecting the environment. It works towards minimising its environmental impact by using sustainable practices and technologies.

Tree Plantation: With support from the Mopperipalayam Panchayat, LMW has planted more than two thousand native tree variety saplings in Sollakattupalayam Panchayat during the review period.

Solid Waste Management: LMW has supported the Kaniyur Panchayat in its efforts at implementing Solid Waste Management projects to develop a cleaner environment and prevent waste dumping. Under this project, wastes generated in households and commercial establishments were seggregated, collected at source, and processed systematically.