marshall machines ltd share price Management discussions

Global Machine Tool Industry

The coronavirus pandemic and its effects on the world economy and industrial productivity have overshadowed most recent global technological developments in the machine tool industry. Global industrial production continued below pre-crisis levels until mid-2021, with a sluggish recovery in machine tool demand occurring until H1 2021. According to Oxford Economics, the output of machine tools is estimated to have fallen by 6.2% in 2020 and expected to increase by 7.9% in 2021. China represents a sizable chunk of the global share, and other Asian markets are expected to perform reasonably well.

As the global automotive sector focuses on creating and developing EVs, switching from conventional cars to electric vehicles (EVs) continues to be a significant worry for the global machine tool industry. The adoption of new EV emissions rules, which will lead to wider uptake of electric vehicles, is projected to have the most impact on machine tool demand in European countries. Additionally, it is anticipated that Chinese EV use would increase significantly, which will have a negative impact on the short-term trends in machine tool demand.

The machine tool industrys tendencies are generally more cyclical than overall fixed investment spending, which is one of the most cyclical parts of the economy in and of itself.

However, medium-term growth tendencies, such as rising demand for automobiles and high-tech consumer goods in emerging nations, are still in force as per capita income rises in the upcoming years. In addition, China, already the largest consumer and producer of machine tools worldwide, is anticipated to keep holding the top spot because it serves as the central manufacturing hub for exports to the rest of the world, despite Chinas declining competitiveness as a result of the countrys rising wages.

Indian Machine Tool Industry

India ranks 12th in the production of machine tools and 7th in the consumption of machine tools, according to Gardners "World Machine Tool Survey, 2019". The expected production of machine ools in India for the fiscal year 2019–20 is Rs 6,150 crores, while the estimated consumption is Rs 15,670 crores.

The difference will be covered by imports, which will make up 66% of consumption in the fiscal year 2019–20.

The prediction for the Indian machine tool industry differs from one sector to another in light of current affairs and sectoral trends. Manufacturing of basic metals and metal products is anticipated to perform better due to the nations relatively strong economic recovery, particularly as construction activity recovers. Meanwhile, as post-COVID enterprises have gradually resumed production in light of the muted demand, it is projected that the recovery in the car manufacturing sector will take longer than expected. In light of these developments, the machine tool industry must explore uncharted waters and take full advantage of technology improvements to spur the creation of new products and procedures.

While the government is emphasising on a self-reliant India, the machine tool industry must continue to collaborate with new and emerging sectors, such as healthcare and medical equipment, infrastructure, aerospace, defence, food processing, agricultural machinery, textile machinery, railways, and power generation, as well as other sectors such as electronics and electronics-related equipment.

Industry Outlook

There is substantial demand for large-sized machine tool requirements in emerging manufacturing industries like aerospace, aviation, healthcare, and infrastructure, as well as in more established industries like railroads, power, and the built environment.

Rising automation and the use of advanced technology in the manufacturing and construction industry will lead to an increase in demand for machine tools.

Indian enterprises are exploring the prospects for joint ventures and strategic alliances with overseas players in order to acquire intellectual property, advance technology, and assess cross-selling opportunities.

Government support and initiatives – such as Make in India, Atma Nirbhar Bharat, PLI, and many others, to advance technology and support domestic manufacturing.

Key Challenges

Lack of indigenous technology - limited investments in research and development leading to commoditized offerings.

Highly import-dependent industry - lack of high-end technologies leading to a substantial gap fulfilled by imports.

Low brand building activities and lack of credible brands - limited efforts on brand building, user-interaction and demonstrations to create awareness.

Highly competitive market - a product-centric market, with little focus on after-sales service.

Lack of complete product range - a product-centric rather than a comprehensive solutions-driven approach.

Company Overview

Marshall Machines, founded by Mr Gautam Sarup in 1961, is a well-known brand in the Indian machine tool industry. Marshall started out by manufacturing high-precision bench lathes, heavy-duty lathes, and capstan lathes. However, in the last two decades, under the aegis of second-generation promoters Mr Gaurav Sarup and Mr Prashant Sarup, the Companys single-minded focus on product innovation, research and development, automation, and Industry 4.0 technologies has positioned it as a niche player in a somewhat commoditized industry. Resultantly, Marshall is currently a front-runner in the space of automated, Industry 4.0-enabled, and smart IoT-enabled CNC solution offerings to Indias leading manufacturing companies. Marshalls clientele is spread across numerous industries, including automobile, consumer durables & appliances, and general engineering, to name a few.

Business Overview

Marshall Machines is in the business of designing, manufacturing, and deploying solution offerings, providing after sales services for machine tool equipment. Products offered by the Company include single spindle CNC machines, innovative two spindle & four spindle CNC machines, automated robotic CNC machine solutions, and Industry 4.0 products such as SmartCorrect Gauging Stations. Since then, the Company has grown into a well-regarded player in automated solutions, smart and technologically superior machine tool offerings that enable its clients to enhance productivity, reduce cost per component, and generate a higher return on investment (ROI) from their machines. Constant product innovation, achieved via rigorous research and development, intellectual property generation and protection, has enabled the Company to produce solutions that meet the emerging needs of its clients.

The Companys machines are being used in a number of industries, including the automobile industry, consumer durables and appliances, and general engineering, among others. They are used to manufacture a variety of products such as axles, crankshafts, auto components, fans, and pumps. They are also used to manufacture bearings, gear blanks, bushes, and other similar items. These machines are well-regarded for their quality, dependability, and precision performance. In addition, Marshall provides its clients with the ability to create and implement customised solutions with the desired flexibility. As a result, customers unique requirements are met with these customised solutions that are designed to maximise the efficiency with which these equipment are used in their operations.

Marshall and Maruti Center for Excellence

During the year, the Company launched a significant initiative along with Automobiles major Maruti by launching Indias 1st comprehensive Training Program for Industry 4.0 Technologies at MACE. In this initiative, Marshall has installed proprietary equipment for training on four types of machines at MACE, i.e., Vertical Machining Center, CNC Turning Center, Injection Moulding Machine, and Hydraulic Press.

The training will cover the three most important areas for machine shops Productivity, Quality and Health. In addition, through the LOPI (Learn, Observe, Practice, Implement) model, trainees will learn to implement Industry 4.0 Technologies in their respective factories.

Performance Discussion

Performance in FY22 was subdued due to the second and third wave of Covid-19, and their resultant panic in the SME customer segment of the Company. Furthermore, certain large size orders couldnt be delivered, as earlier expected, during the financial year due to some deferment at clients end, coupled with supply chain and logistic issues. As a result, Revenue from Operations for the year stood at Rs 60.33 Crores, down 10% compared to the Rs 67.14 Crores in the previous year. EBITDA for the year stood at Rs 6.90 Crore, down 27% compared to the previous years _9.41 Crores. Subsequently, the Company reported a net loss of Rs 3.14 Crores compared to a profit of Rs 0.36 Crores in the previous year.


Post completion of the recent CAPEX cycle (2018-2021), the Company has created a cumulative capacity of _250 crores in Revenues from erstwhile _75 crores. The Company will rely on the increased deployment of Industry 4.0 and affordable automation solution offerings in order to enhance revenues and capacity utilisation. In addition to having a much higher ticket size, these high-end automated product cells also have better profitability margins. The disruptions caused by the first and subsequent waves of Covid-19 have had an impact on the Companys performance in FY21 and FY22. However, on the customer front, they have highlighted several structural problems in the way Indian machine shops are currently operating. It has drawn attention to challenges such as a scarcity of skilled operators, an over-reliance on human resources, the need for increased productivity, and a dire need to reduce cost per component to optimise profitability in challenging times. Marshall Machines has a complete gamut of product offerings that address these needs, and we will be at the forefront of addressing these problems with our meticulously developed product portfolio.

Order Book and Order Bid

The Order Book and Order Bid stands at the highest ever levels for the Company, indicating good demand visibility for the coming financial year.

Order Book (Rs in Crore)

31st March 2021 31st March 2022 YoY Change (%)
51 54 6

Order Bid (Rs in Crore)

31st March 2021 31st March 2022 YoY Change (%)
135 260 93

Financial Ratios

Pursuant to Schedule V (B) to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended:

FY21 FY22 % Change Remarks
Debtors Turnover 5.75 3.35 -42% Due to increase in trade receivables during FY22.
Inventory Turnover 0.96 0.76 -21% NA
Interest Coverage Ratio 1.15 0.17 -85% Due to lower profitability during FY22.
Current Ratio 0.99 0.97 -2% NA
Debt to Equity Ratio 0.83 0.87 5% NA
Operating Profit Margin (%) 14.0% 11.4% -19% NA
Net Profit Margin (%) 0.5% -5.2% NA Due to lower sales and profitability in FY22.

Human Resources

A companys success relies on the strength of its people, and Marshall Machines is no different. Being in an industry driven by intellectual capital, our people are the greatest and most important asset we have. Therefore, the success of Marshall Machines depends upon engaged and motivated individuals. The Company firmly believes that its human resources are the critical enablers for the Companys growth and are one of its most important assets. Considering this, the Company continues to develop its human capital and establish its brand in the market to attract and retain the best talent. During the period under review, employee relations continued to be healthy, cordial, and harmonious at all levels, and your Company is committed to maintaining good relations with the employees.

Internal Control Systems and Their Adequacy

The Company has a robust system of internal controls to safeguard and preserve its assets from loss, illegal use, or disposal. All transactions are approved, documented, and reported to Management in a timely manner.

The Company complies with all relevant accounting standards for the appropriate maintenance of books of accounts and the presentation of financial statements. The Audit Committee establishes the scope, operation, frequency, and technique for internal auditing. Internal auditors conduct audits, which include monitoring and evaluating the effectiveness and adequacy of the Companys internal control systems and compliance with operating systems, accounting procedures, and policies across all locations. They also submit periodical internal audit reports to the Audit Committee. Process owners take necessary measures in their respective areas based on the Audit committees internal audit report and evaluation. Internal auditors have said that the Companys internal control system is strong and effective. Additionally, the Board has established a legal compliance framework to guarantee compliance with all relevant laws and that such procedures are sufficient and effective.

Forward Looking Statement

Certain statements in this report concerning our future growth prospects are forward-looking statements, which involve numerous risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The Companys results may be affected by factors including, but not limited to, the risks and uncertainties in research and development; competitive developments; regulatory actions; the extent and duration of the effects of the COVID-19 pandemic; litigation and investigations; business development transactions; economic conditions; and changes in laws and regulations. Marshall Machines Limited will not be responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.