Precision Camshafts Ltd Management Discussions.

Global Economy

The past few years have witnessed an increasing number of world leaders favouring protectionism. The prime reason behind this was encouraging employment to local people, and reducing trade and external deficit. However, what protectionism did was: elevated trade tensions, caused social unrest and started a geopolitical war. The smooth flow of people, products, and services took a reverse route, causing a sluggish global economic growth of 2.9% in 2019. Despite this, the market sentiments were found to be positive owing to the indicators like accommodative monetary policy, crude oil prices in a steady range and US-Chinas friendly trade talk. A gradual recovery, riding on the back of aforementioned sentiments, was anticipated in 2020. But Covid-19 had other plans. The deadly Coronavirus outbreak severely impacted the supply chain, forcing corporates to re-think about their strategies. These uncertain times brought about a change of working remotely. A technological shift is being experienced with a growing number of people adopting e-commerce and video conferencing for communication. Going forward, a rising number of companies and countries are anticipated to seek greater safety in international diversification. This will help them hedge against the dangers and risks of single-source supply partners – making working together more vital than being self-sufficient.

Indian Economy

Indias GDP has grown six times from ~USD 459 billion in 1999 to touching ~USD 3 trillion mark in 2019, over the last two decades. Today, our economy is fifth largest in the world. But dark clouds have been looming all over the economy since FY 2018-19. During this period, demand started to contract, ultimately leading to low industry capacity utilisation. The downside risk was quite imminent with more and more economists questioning whether the slowdown was cyclical or structural. And to prevent the economy from freezing, the Government announced slew of measures such as GST and income tax rate cuts and increasing minimum support prices (MSP) for farmers to strengthen the demand side. RBI too walked in at different times to cut rates with the expectation that moratorium benefit will get passed down to end-users. On the contrary side, endeavours were also taken to bring alleviation on the supply front by easing business regulations, reducing corporate tax and injecting liquidity into banks. There were expectations of signs of recovery into the next fiscal year until Covid-19 broke out. The pandemic caused economy deterioration with restrictions on daily, activities making lockdown and social distancing our new normal. This challenging situation was acknowledged by the Government when it announced a stimulus package of 10% of GDP, which majorly included liquidity measures and credit guarantees to directly support the growth.

Automobile Industry

Since the 2008 financial crisis, the global automobile industry has come a long way. Today it provides employment to 1 out of 7 people in the world. Over this last decade, the shareholders valuation of the global automotive suppliers doubled to USD 510 billion. The recent trend of autonomous driving and electric-powered vehicles have forced automobile manufacturers to alter their business model. On top of that, trade war and environmental concerns have added to the muted demand of the automobile sales, which has been little bleak since 2018. Amid this backdrop, OEMs appeared well to cope up with the changing phase in the industry. They were seen designing and developing new car models, syncing it with the future trends. As the primary product morphs in an unorthodox way, there is high probability that innovation will spur growth in the industry. Despite pressure on sales, R&D expenditure soared mainly on the back of regulations. Unfortunately, Covid-19 outbreak triggered a severe pressure on an industry already coping with a downshift. At this point in time, major manufacturers were seen running the operations with minimal staff to keep their people safe. Further, to stay resilient in these trying times, many OEMs also launched online sales channels to digitally connect with consumers, revealing new ways of doing business.

Auto Component Industry

Wide array of products, consolidation and active expansion activities together make the auto component sector very lucrative for investors. And, with the introduction of modern technologies almost every single day, the operating environment is playing out in the favour of players embracing the innovation. The advantage of low-cost manufacturing has made OEMs to source auto components from Asian countries such as China and India. This, along with the devaluation of the rupee, is going to help Indias auto component suppliers with higher exposure to export market. Already, the domestic auto component supplies 1/4th of the production to overseas market. And, given the backlash against China post Covid-19 outbreak, it may well prove out to be positive for countries like India, Taiwan, or Indonesia in the years to come.

Camshaft Industry

The Camshaft is a very concentrated market with most of the market share coming from a few specific players. Over the past decade, strictly implemented emission standards have led to the modification of outdated engines.

Hence, giving rise to advanced engines requirement. Responding to this, the camshaft manufacturers embedded modernisation with major impetus on lowering the weight of camshafts. Region-wise, Asia-Pacific is turning out to be the worlds fastest-growing market for vehicle camshaft owing to significant rise in the number of commercial vehicles. In near term, the Covid-19 outbreak has severely impacted the operations in the camshaft industry. However, by 2027, the global Camshaft market is expected to reach the market valuation of USD 27 billion witnessing a ~3% CAGR (Source: Transparency Market Research).


Growth of auto-component industry is inter-linked to demand of automotive industry. Therefore, success factor of the Original Equipment Manufacturers (OEMs) plays a vital role in opening doors of opportunities for automotive components makers.

Rise in personal mobility

In the near-term, Covid-19 is likely to cause consumers to switch up from public transport to personal mobility. The social distancing norms and the concern associated with the spread of the virus are steering consumers to purchase personal vehicles.Henceintroducingfirst-time buyers.

Lower level of penetration

Lower level of vehicle penetration in India as compared to other countries, signifies the enormous growth potential present here. The young demographic and urbanisation are going to shift that paradigm, improving the overall domestic automotive ecosystem.

Deep localisation

Indian auto-component makers are placing huge emphasis on research and development (R&D), which is adding to its competitiveness on a global scale. And, with time, increasing number of automobile makers in India are preferring localisation owing to the cost advantage, depreciating rupee, and faster inventory turnaround time. Adding to these, the Covid-19 pandemic has also pushed the country towards self-sufficiency, which is deepening localisation.

Collaboration with foreign companies

Apart from just developing technologies in-house, auto component makers, through their strategic alliance and acquisitions, are gaining access to new technology and new markets, both domestically and internationally.

BS-VI norms

The BS-VI emission standard is on the same level as worlds most stringent norms such as ‘Euro VI. Domestic auto-component industry conformity to BS-VI will help discover new overseas market, catering the needs of foreign clients.


Weakening consumer sentiments

Job losses and increasing household debt have impacted the sales of vehicles. Moreover, the rise in vehicle acquisition cost owing to the regulatory changes, rising raw material prices and high insurance cost is deterring buyers.

Discretionary nature of the business

At the time of economic slowdown, the decisions to purchase automobile can be delayed owing to discretionary nature of the business.

Performance Review

Business review PCL


Contribution to the revenue (%)

Reason for machined camshaft growth

FY 2019-20

FY 2018-19

Casting camshaft



The high margin machined camshaft business offers potential 2.5 times higher realisation as compared to camshaft casting Making, the Company focus on ramping its machined camshaft capacity.
Machined camshaft



Group Companies

Subsidiaries Products & services Total income ( in Crores) Reason for the growth
FY 2019-20 FY 2018-19
MFT Auto components 169.47 159.41 Wide array of product range in sync with the market trends
MEMCO Auto components 40.83 47.26
EMOSS Electric mobility solution 97.06 71.71 A strong customer base created through collaborated efforts, wherein, cross-selling capabilities are used to increase volumes

Financial Overview: Consolidated and Standalone

(Rs. in Crores)

Financial Results

Standalone for the year ended

Consolidated for the year ended

31st March

31st March
2020 2019 2020 2019
Revenue from Operations 442.89 423.69 746.23 695.21
Other Income 21.17 16.88 21.45 17.67
Revenue from Operations and Other Income 464.06 440.57 767.68 712.88
Earnings before Interest, Tax, and Depreciation & Amortisation (EBITDA) 115.13 106.48 129.50 135.63
Profit for the year 72.05 42.91 25.63 7.07
EPS (Basic) (In ) 7.59 4.52 3.68 1.21
EPS (Diluted) (In ) 7.58 4.52 3.68 1.21
Standalone Consolidated
The revenue from the Companys operations registered an increase of 4.53%, mainly on the back of growing realisation of high margin products and exports. Profit after Tax (PAT) increased by 67.91% to 72.05 Crores as compared to 42.91 Crores in the previous year, owing to the cost rationalisation. PAT showed a significant growth increasing by from 7.07 Crores in FY 2018-19 to Rs. 25.63 Crores in FY 2019-20. The overall improvement in the performance is the result of operational excellence, synergy benefits and products addition done.

Significant Changes in Financial Ratios

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial

Financial ratio names


Change %

FY 2019-20 FY 2018-19
Current Ratio 3.78 2.91 30%
Net Profit Margin (%) or sector-specific equivalent ratios, as applicable. 15.72 9.94 58%
Return on Net Worth( %) 11.09 7.13 56%
(details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof)
Financial ratio names


Change %
FY 2019-20 FY 2018-19
Net Profit Margin (%) or sector-specific equivalent ratios, as  applicable. 3.36 1.00 234%
Return on Net Worth 3.94 1.09 260%

Risk Management

Risk management controls are integrated into all levels of our business and across all operations. The Company continuously monitors and manages its business exposure to risks. It seeks to ensure that risks are appropriately mitigated in order to deliver the Companys strategy.

Risk Impact Mitigation
Regulatory environment risk Inability to adapt to the changing regulatory landscape may adversely impact sustainability. Carefully monitor the regulatory environment and based on the results, implement appropriate changes that help stay ahead of the curve.
Supplier risk Failure from suppliers end to deliver raw materials on time owing to financial failure or production issues could disrupt operations. Reputable suppliers with relevant experience and proven track record.
Attracting and retaining high-caliber employees Failure to recruit and/or retain employees with appropriate skills could affect target achievements. Continuous engagement with employees through activities and effective training in discipline helps ensure a strong, two-way and transparent communication across all hierarchy levels of organisation.
Appropriateness of product Failure to design and build a desirable product for customers at appropriate price may undermine the ability to fulfil business objectives. Production processes adhere to stringent quality standards, assuring efficiency to clients.
Safety and health risk Health and safety or environmental breaches can result in incidents affecting employees. In-house team undertakes health and safety checks and observations at all operational units, preventing accidents and injuries.

Human Resource Management

The Companys strong cohesive team is critical to its success. Irrespective of position or title, the Companys people are recognised for their excellent work. Everyone is inspired, motivated and supported to deliver. Moreover, the Companys flat hierarchical structure ensures agility, fast decision-making and constant innovation. Entrepreneurial flair remains a vital component of the Companys cultural DNA. This empowers the people to feel and behave like long-term owners of the business. The Companys good working relationship with its employees has resulted in its stellar performance. Besides, training and development of workers is a steady process at PCL. To enhance their skills, the Company undertakes various training programs (Technical Training at Site & On-the-Job Training) as well as programs for social awareness about workplace safety. Moreover, diversity and inclusion at every department is the top priority. For this, the Company provides equal opportunity to all employees, irrespective of race, colour, religion, gender, marital status, age, national origin or disability. As on 31st March, 2020, the Companys employee strength stood at 2,078.

Internal Control System

The Company works under the environment of SAP. This helps gain control of every stage of the manufacturing process. The Company has appointed Internal Auditors who cover all the aspects that could financially impact its operations. The Company has also set up adequate controlling systems to curb production wastage and inculcate processing efficiency.

Cautionary Statement

This document contains statements about expected future events, financial Limited, which and 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 significant risk that the assumptions, predictions and other forward-looking statements will 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, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the Management Discussion and Analysis section of Precision Camshafts Limiteds Annual Report, FY 2019-20.