Menon Bearings Ltd Management Discussions.


Indian Economy Overview:

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

With an estimated annual contraction of 8% in GDP, 2020-21 has been the worst year in terms of economic performance in India since 1950-51.

While the Indian economy was losing growth momentum because of the COVID 19 pandemic, the negative performance in 2020-21 is largely on account of the nationwide lockdown imposed on March 25, 2020 to prevent the spread of Covid-19 pandemic in the country, and continuing restrictions on economic and recreational activities for the rest of the year has severely impacted the economy and business. To be sure, the economy has been recovering with the easing of restrictions. Indias GDP re-entered growth territory during the quarter ended December 2020.

With the economic activities gaining momentum post Covid 19 lockdown and rollout of coronavirus vaccines, the Indian economy is likely to do better than the projection of an 8 per cent shrinkage in the current fiscal, says Finance Ministry.

"Positive GDP growth in Q3 of FY21 for the first time since the onset of the pandemic adds to the positive sentiments as the economy is set to close the year with activity levels higher than measured in the second advance estimates of GDP," the report said.

The Reserve Banks industrial outlook survey (IOS) conducted in Q3 of FY21 has also re-affirmed this optimism, with respondents indicating a strengthening of production, order books and employment during the third quarter, driven by easing of lockdowns, re-opening of businesses and improvement in the availability of finance from banks and internal sources.

However, emerge of second wave of COVID 19 pandemic and local lockdowns announced by various state governments from time to time from March 21 will have further adverse impact on the Indian economic in general and on the Company in particular during the FY 22.

Industrial Review:

The production and demand of the auto component industry is directly proportional to that of the automobiles industry. Although a sizeable portion of auto components production caters to OEMs, the aftermarket or the replacement markets have emerged as crucial sources of revenue for the auto components industry over the past few years. In recent years, manufacturing of auto components is gradually gaining traction toward Asian countries such as China, India, and others due to the presence of higher market potential and low-cost manufacturing.

The Indian auto component industry, being a critical part of the OEM value chain, has grown at a healthy pace over the past few years. The organised segment of this industry includes OEMs who are engaged in the manufacturing of high-value precision instruments, while the unorganized segment comprises of low-valued products catering to after-market services. One of the main challenges faced by the indigenous component manufacturers is the low-level of technology adaptation and R&D intensity.

A stable government framework, increased purchasing power, large domestic market, and an ever-increasing development in infrastructure have made India a favourable destination for investment. As per Automobile Component Manufacturers Association (ACMA), automobile component export from India is expected to reach US$ 80 billion by 2026.

Covid-19 pandemic has resulted in lockdowns across the globe leading to plant closures, job losses, economic contraction and consequent decline in demand.

FY21 was a year of transition for the Indian auto components industry. The year presented fresh challenges in the form of outbreak of Covid-19 and the resultant supply side disruptions, loss in production of automobiles, rise in input costs, trade disruptions, etc. Alongside, the industry also witnessed business growth opportunities for the long term.

According to ACMA, the turnover of the auto components industry fell by 34% YoY to Rs 1.19 Lakh Crore (USD 15.9 bn) during H1-FY21. The second half of FY21 has shown a strong recovery. However, FY22 is expected to witness a positive growth of 18 to 20%, after two consecutive fiscals of de-growth. According to the recent ACMA-PwC joint survey of ACMA leadership, despite concerns of another wave of the pandemic, the industry is cautiously optimistic about the prospects of the Indian economy and the automotive sector for FY 22.


Following are achievements in the past four years:

* Production of two wheelers, passenger vehicles, commercial vehicles and three wheelers reached 21.03 million, 3.43 million, 0.75 million, and 1.13 million, respectively, in FY20.

* Under National Automotive Testing and research and development (R&D) Infrastructure Project (NATRiP), various facilities including passive safety labs comprising of crash core facility and crash instrumentations including dummies were established at ICAT-Manesar and ARAI-Pune.

Futuristic Outlook:

The Indian auto-components industry is expected to become the third largest in the world by 2025 and Auto Components industry exports to grow 5X in next 10 years.

Keeping pace with the automotive industry, Indias auto component industry has been flourishing.

Few trends that are favorable for the industry are as below:

• Growing working population and expanding middle class are expected to remain key demand driver.

• Reduction in excise duties in motor vehicles sector will spur the demand for auto components.

• Relative to competitors, India is geographically closer to key automotive markets like the middle East & Europe. India has a competitive advantage in auto components categories such as shafts, bearings and fasteners, this factor is likely to result into higher exports in coming years.

• 100 percent FDI is allowed under automatic route for auto component sector.

• In November, 2020 the Union Cabinet approved PLI Scheme in Automobile and Auto components with an approved financial outlay over a five-year period of Rs. 57,042 Crores.

• A cost-effective manufacturing base keeps costs lower by 10-25 percent relative to operations in Europe and Latin America.

• The announcement of an incentive-based vehicle scrappage policy, though voluntary, is expected to lead to a rise in automobile sales in the country, which is a direct benefit for the auto components industry.

• The shift from BS-4 to BS-6 norms, which though is at present an impediment for the industry, will place the industry on par with international regulations on safety and emissions in the long term.

As per Automobile Component Manufacturers Association (ACMA), automobile component export from India is expected to reach US$ 80 billion by 2026. The Indian auto component industry aims to achieve US$ 200 billion in revenue by 2026.


The Opportunities Ahead:

• Increasing focus on after market

• Shift in sourcing base for large global distributors to India

• New business models likely to surface

• OEMS to drive local suppliers to partner with global players to get access to better technology

• Opportunity for global OEMs to de-risk supply base- India offers strong credentials, established relationships and competitive cost proposition to become an alternative sourcing venue to China for global OEMs , hence, de-risking the supply base.

• Pursue export opportunities aggressively.

• Enhance import substitution.

• Plan activities towards Governments Make in India appeal and focus to manufacture everything from start to end locally and there by take benefit of Governments subsidies and boosters.

• Attract foreign direct investments as many global companies are presently looking at India as next destination to set up their plants & businesses as a shift from China after Covid-19 pandemic.


At present the industry faces the following threats: a. Increasing cost of input raw materials. b. Uncertainty like lockdowns due to Covid-19 pandemic. c. Competition from unorganized players.

Future Challenges:

Multiple trends, which may have impact in shaping the future of the automotive and auto components industry, can be:

1. Technology upgradation:

The migration to BS-6 norms poses challenges for the Indian auto components manufacturers due to the technology-intensive nature of the management modules of BS-6. To bridge this gap, engaging in JVs with lead firms could play a pivotal role.

2. High tax:

Some of the auto-components are placed at the highest slab of GST in India.

3. Changing OEM needs.

4. Constantly shifting market dynamics due to changing manufacturing locales, customer demands, operating models and priorities.

5. Expedited enforcement of emission and safety standards

6. Increasing prices of raw materials


The segment-wise products consist of Original Equipment (OEM), After Market and Exports. The Company has a strong share of business in the OE Segment and has been upgrading its capabilities to stay technologically relevant to the segment. In the After Market and Export Segments, the Company supplies parts to several applications. The Companys constant endeavor to upgrade technology and reduce costs has been its strength. The products manufactured consist of Bearings, Bushes, Thrust Washers, Strips and Aluminium Die Casting Components. Maximum turnover is recorded in Bearings and Bushes.


The increase in the demand for the Companys products used in segments like Heavy Vehicles, tractors, powders and strips are expected to offer good opportunities for the Company coupled with effective cost control measures undertaken. Your company has commenced its actions to be a part of this change with appropriate product and solutions for customers. The outlook for the year is expected to be higher throughout the year.


The Board of Directors regularly overview external and internal risks associated with the operations of the Company and carries out its impact assessment & effective implementation of the mitigation plans and risk reporting is conducted.


The Company has in place proper and adequate Internal Audit System that promotes reliable financial reporting, safeguards assets, encourages adherence to fair management and ethical conduct. Additionally, the Company has in place proper and adequate internal control systems which have been designed in a way that, they not only prevent fraud and misuse of the Companys resources but also protect shareholders interest. Internal control systems comprises of policies and procedures which are designed to ensure reliability of financial reporting, compliance with policies, procedures, applicable laws and regulations. The Audit Committee of Board of Directors, on regular intervals and in co-ordination with Internal and Statutory Auditors, reviews the adequacy of Internal Control Systems within the Company.

Based upon the recommendations of the Audit Committee, an Annual Audit Plan (AAP) is prepared and is reviewed periodically by the top management and the Audit Committee. The internal audit focuses on compliance as well as on robustness of various business processes. A feedback on non-conformities along with recommendation for process improvements is directly provided to the top management of the Company. Compliance on audit findings and tracking of process improvements is regularly carried out.


Financial Performance:

Financial Year Income
(Rs. in Lakhs)
2017 12422.18
2018 14678.20
2019 17541.38
2020 14035.59
2021 15090.09


Financial Year PBT
(Rs. in Lakhs)
2017 2753.91
2018 3233.51
2019 3610.2
2020 1960.67
2021 2487.17


Financial Year PAT
(Rs. in Lakhs)
2017 1909.88
2018 2107.35
2019 2529.68
2020 1439.80
2021 1880.00


Financial Year EPS
(in Rs. )
2017 3.41
2018 3.76
2019 4.51
2020 2.57
2021 3.35


Development in Human Resources:

Since its inception, your Company has always viewed its employees as its greatest asset. The Company strives to develop the most superior workforce so that it can accomplish along with the individual employees, their work goals and services to its customers and stakeholders. Our fundamental belief in immense power of human potential and team work is epitomised in our WE approach. To us, WE represents a strong collective energy. A transformational force that stimulates enterprise accelerates our constant pursuit of excellence and empowers our people to realise their full potential. The Company also believes human resources as the supporting pillars for the organizations success. Following the Covid-19 pandemic and lockdown relaxations, the Companys utmost priority has been health, safety and well-being of its employees.

As on 31 March, 2021 the Company had 236 permanent employees.

Development and Up-gradation of Technology:

All the staff members working in manufacturing departments have been advised to take different projects:

1. To reduce rejection and wastage in raw materials and consumables,

2. To reduce setting time and to focus on production,

3. To optimize production activities to reduce electrical energy per unit of production,

4. To work on packing to enhance preservation and safety,

5. To develop new items in shortest possible time to have early business.

This is an ongoing process and projects are getting completed one by one and new projects are being undertaken. This has given increase in top as well as bottom line.

Global Approach:

The Company trusts its capabilities to capture every opportunity of business in the global arena. Your Company is globally positioned with business activities spanning 24 Countries around the globe. Exporting about 30% of its production, it enjoys strong brand equity among leading OEMs all over the world.

Forward Looking Statements:

Certain statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied therein. Important factors that could make a difference include raw material availability and prices thereof, cyclical demand and pricing in the Companys principal markets, changes in Government regulations and tax regime, economic developments within India and the countries in which the Company conducts business and other incidental factors.


Key Financial Ratios:

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratios. The Company has identified following ratios as key financial ratios.

Ratios 2020-21 2019-20 % change
Debtors Turnover 3.34 3.83 -12.92%
Inventory Turnover 3.30 2.78 19%
Interest Coverage Ratio 10.06 6.80 48%
Current Ratio 1.84 1.79 3%
Debt Equity Ratio 0.30 0.44 -32%
Operating Profit Margin % 18.85% 17.22% 9%
Net Profit Margin % 12.46% 10.26% 21%

Debt Equity ratio is improved as compared to immediately previous financial year on account of reduction in debt in financial year 2020-21 as compared to financial year 2019-20.


Return on Net Worth in the financial year 2020-21 is 19.04% as compared to 16.32% in the financial year 2019-20. During the financial year under review, return on Net Worth increased by 17% as compared to immediately previous financial year on account of increase in profits.