ptc industries ltd share price Management discussions

1https://mospi.gov.in/sites/default/files/press_release/PressNoteNAD_28feb23final.pdf ²https://dea.gov.in/sites/default/files/Monthly%20Economic%20Review_Feb%202023.pdf ³https://www.indiabudget.gov.in/doc/bh1.pdf

Indian Economic Outlook

High-frequency indicators such as GST collections, railway and air traffic, electronic toll collections and the volume of E-way bills generated indicate a robust economic recovery. The countrys sustained growth momentum is poised to make it an attractive destination for substantial investments.

India is expected to remain the fastest-growing nation among the G-20 nations in the coming years. Also, Indias presidency of the G20 Summit in 2023 has significantly bolstered its international standing.

With reduced uncertainties at the beginning of FY24, businesses are expected to focus on the growth potential. The RBI is anticipated to keep inflation under control, tackle a depreciating currency and reduce the immediate impact of a fiscal deficit on the Indian economy. Along with a favourable policy environment and an improvement in downside risks, consumer sentiment is expected to further improve, offering some modest relief to the Indian economy.

The current account deficit is also expected to shrink from year-beginning predictions as India boosts its market share in both IT and non-IT services, which have witnessed rising demand as an outcome of the pandemic. Additionally, initiatives like Aatmanirbhar Bharat and the production-linked incentive (PLI) scheme would further aid this economic growth by boosting domestic production and increasing the competitiveness of Indian industries globally. Strong macroeconomic fundamentals and the stated initiatives would contribute to the long-term growth of the economy.

Global Defence Industry

The Global defence market rose at a 7.9% CAGR from USD 534.79 billion in 2022 to USD 577.19 billion in 2023. Asia-Pacific was the largest region-wise market for defence in 2022, with Western Europe expected to expand the fastest throughout the projected period (2023-2027). The acceptance of unmanned combat vehicles, the popularity of corner shot weaponry, the development of autonomous fighter jets, and the impact of the Russia-Ukraine war are all trends in the defence sector. The Russia-Ukraine conflict has resulted in economic sanctions, commodity price increases, and supply chain disruptions, raising already high inflation and hurting numerous markets abroad. The market is expected to witness expansion, growing from USD 577.19 billion in 2023 to USD 718.12 billion in 2027 at a CAGR of 5.6%⁴.

Global Aerospace and Defence Industry

The global aerospace and defence industry is a multifaceted and strategically vital sector encompassing various activities related to aviation, space exploration, and national security. On one hand, the aerospace segment focuses on the design, manufacturing, and maintenance of aircraft, spacecraft, satellites, and related components for both civilian and military applications. This part of the industry caters to the growing demand for commercial air travel, cargo transportation, and space exploration missions. On the other hand, the defence segment is dedicated to developing and producing advanced military hardware, including fighter jets, naval vessels, missiles, and defence systems, to ensure national security and protect against evolving threats.

Characterized by continuous technological advancements, the aerospace and defence industry operates on a global scale, with major players spread across different regions worldwide. The sectors innovations often drive broader technological progress, pushing the boundaries of engineering, materials science, and computer technology. Additionally, the industrys complex supply chain involves a network of suppliers, subcontractors, and international partnerships, necessitating meticulous coordination and efficiency to meet rigorous quality standards and delivery timelines.

Geopolitical factors and international relations significantly influence the industry, impacting procurement decisions and market dynamics. As the sector faces the challenges of cost management, cybersecurity threats, and sustainability concerns, it also presents opportunities for growth through investment in emerging technologies, eco-friendly practices, and strategic collaborations. Overall, the global aerospace and defence industry plays a pivotal role in shaping the future of transportation, security, and space exploration. The aerospace and defence sector (A&D) includes spacecraft, commercial and military aircraft, tanks, missiles, and other weaponry-related equipment. It also involves the manufacture of landing gear, propellers and rotors, engines, and engine parts. Firearms and accessories account for roughly 60% of total income in the aerospace and military business, with ammunition sales accounting for the remaining 40%.

Global Industry Outlook and Key Trends

Global defence spending has been on a clear upswing for almost a decade and is at a historic high now, having breached the $2 trillion threshold in 2021, led by the whittling down of traditional, rule-based world order and the return of great power competition among leading geopolitical powers marked by sustained geopolitical instability, rising political tensions, and conflict.

The Russia-Ukraine war has been a watershed moment geopolitically, having brought back the spectre of war over Europe back to life after almost 3 decades following Russias military resurgence and is showing no signs of abating even after heading into its second year. The U.S.-China faceoff further escalates, with the U.S. considering China as its strongest and most serious long-term rival and threat.

The continuous military assistance from the West to Ukraine and the emphasis on maintaining traditional superiority over adversaries have accelerated the replacement of aging defence equipment with next-generation systems and technologies. This has been facilitated through the initiation and award of new large-scale defence contracts of strategic significance, covering extensive scopes and long-term horizons.

Globally, the defence industrial base is gearing up to increase production rates in the near term to replenish depleting stockpiles of munitions, missiles, and weapons due to their rapid usage in Ukraine and to meet the rising international demands. As a result, global defence spending is projected to reach a record ?2.5 trillion by 2027, with the industry preparing to ramp up production rates to unprecedented levels in the near to medium term. These efforts are aimed at meeting the significant global demand, restoring depleted inventory levels, and advancing next-generation capabilities, with substantial investments underway in research and development.

Commercial aviation, on the other side, has been experiencing a resounding comeback from the pandemic, with robust passenger demand levels. This strong rebound is attributed to sustained and pent-up travel demand, as well as consistent growth in air cargo traffic across most key markets and regions. The global airline passenger traffic is now reaching pre-pandemic levels, further bolstered by the optimistic expectations of a significant surge in civilian travel.

The ongoing recovery in demand and activity levels among airlines worldwide has been both steady and encouraging. Projections indicate that global air passenger demand is expected to grow by almost 3% from pre-pandemic levels by the end of 2023. This positive uptrend in commercial aviation signals a promising return to normalcy for the industry as it bounces back from the challenges posed by the pandemic.

The near-term outlook for the aerospace and defence industry is expected to be mainly driven by supply-side issues. The industry is facing difficulties due to disruptions in the supply chain, bottlenecks, constraints, and labour shortages. While the situation is gradually improving, these factors are likely to impede the industrys plans to increase production rates in the near term. The industry OEMs are grappling with the complexities of managing these supply-side hurdles, which may affect their ability to meet growing demands. This presents a significant opportunity for supply chain growth.

The recent mega-orders for more than 900 passenger jets placed by IndiGo and Air India demonstrate an unprecedented growth potential which could help fast track the growth of the Indias aviation ecosystem while providing a much-needed boost to the industry globally.

Indian Defence manufacturing sector

The defence sector is an important part of the Indian economy. The diversified geology and geography of India, particularly its 6,811-kilometer-long border with China and Pakistan, present significant challenges for the countrys defence. As a result, the Indian defence and aerospace industry is one of the priority sectors of the governments Aatmanirbhar Bharat initiative. The domestic Defence sector is poised for a massive transformation. To promote the growth of this industry, the Government aims to establish an indigenous manufacturing infrastructure and develop a strong research and development ecosystem. By 2025, the Government aims to achieve a turnover of USD 25 billion, including exports worth USD 5 billion in aerospace and defence goods and services⁵.

With the Government providing an enhanced impetus to strengthen defence capabilities and reduce reliance on imports, Indias defence sector has seen significant reforms in recent years. The Ministry of Defence is stepping up with initiatives to encourage indigenisation, such as prohibiting the import of several components over time. To aid the domestic defence industry, the Government is striving to create a robust ecosystem and introducing favourable policies that encourage transparency, predictability, and ease of doing business. The Government has implemented de-licensing, deregulation, export promotion and foreign investment liberalisation measures. Also, the Ministry of Defence has released three ‘Positive Indigenisation Lists, which comprise 310 pieces of defence equipment that will be manufactured locally. To scale up exports and foreign investment, FDI in the Defence sector has been increased to 74% through the automatic route and 100% through the government route.

The Government has also announced two dedicated Defence Industrial Corridors in Tamil Nadu and Uttar Pradesh, which will act as clusters of defence manufacturing, leveraging existing infrastructure and human capital. Additionally, the Government has rolled out supportive schemes such as iDEX (Innovations for Defence Excellence) and DTIS (Defence Testing Infrastructure Scheme) to promote innovation within the Defence and Aerospace sectors.

The domestic defence sector is witnessing a surge in order books and expanding revenue streams, driven by the Governments emphasis on localisation. The Defence sector is in a sweet spot to witness significant growth over several years, given its significant market size, both domestically and internationally. The pressing need to increase capex and localise production, fuelled by recent conflicts closer to India, Europe, and other parts of the world, further strengthen the sectors potential for growth.

Indias defence budget

India is currently the worlds fourth-largest military spender, with a defence budget that accounts for nearly 2.15% of the countrys total GDP. The defence industry was allocated INR 5.94 lakh crore in the Union Budget 2023-24 which is 13.18% of the total budget and a 13% increase from the previous year.

Defence Budget 2023-2024

E5.94 Lakh Crores

Allocated to Ministry of Defence

13.18%

of the total Gol Budget

An enhancement of

E68,371.49 crore (13%)

over the Budget of 2022-23

Indias Defence Exports

In FY23, Indias defence sector reached a new high in terms of defence exports, demonstrating the countrys improved military manufacturing capacity to design and build world-class goods. India has exported a variety of platforms, including the Dornier-228, Brahmos missiles, PINAKA rockets and launchers, Line Replaceable Units, and Avionics and Small Arms parts and components. Over the previous few years, the government has implemented several policy efforts aimed at simplifying export procedures and instituting changes, including the notification of three Open General Export Licences (OGEL). Export leads received from various countries are disseminated to the registered Indian Defence Exporters in real-time, enabling them to respond to export opportunities promptly⁶.

Titanium Opportunities

Titanium offers a plethora of opportunities across various industries, thanks to its exceptional properties and versatility. As a lightweight and strong metal with excellent corrosion resistance, titanium has become a sought-after material in aerospace and defence applications, where weight reduction is crucial for fuel efficiency and enhanced performance. Its biocompatibility makes it ideal for medical implants and prosthetics, offering patients durable and long-lasting solutions. Moreover, titaniums resistance to extreme temperatures and harsh environments makes it suitable for use in the marine industry, power generation, and chemical processing. As technology advances, titanium continues to find new applications, and its unique properties unlock exciting opportunities for innovation and advancement in multiple sectors.

Aerospace Industry

Titanium plays a vital role in the aerospace industry, offering a multitude of advantages for aircraft and spacecraft applications. Its lightweight yet strong nature makes it an ideal choice for critical components, helping to reduce overall aircraft weight and enhance fuel efficiency. With its exceptional corrosion resistance, titanium withstands the harsh environmental conditions faced by aircraft during flight, ensuring structural integrity and longevity. It is commonly used in engine components, landing gear, aircraft frames, and fasteners.

Titaniums high strength-to-weight ratio allows it to be used in fan blades and compressor components, which are critical to the efficient functioning of aircraft engines. The use of titanium in these parts helps reduce the overall weight of the engine, leading to improved fuel efficiency and reduced emissions. Titanium is also widely used in the hot section of aircraft engines, particularly in the turbine components that operate at high temperatures. Its exceptional heat resistance enables the turbine blades and vanes to withstand the intense heat generated during engine operation without losing structural integrity.

The use of titanium in aircraft engines enables manufacturers to design more efficient, high-performance engines with reduced weight and enhanced durability. Its contributions to improved fuel efficiency, increased engine life, and enhanced safety have solidified titaniums position as a critical material in modern aerospace engineering.

Defence Industry

Titanium is a highly valued material in the defence industry due to its exceptional properties that enhance the performance and capabilities of military equipment and systems. Its strength-to-weight ratio and resistance to corrosion make it a preferred choice for various defence applications.

In military aircraft, titanium is extensively used for structural components, such as airframes, wings, and landing gear. Its lightweight nature allows for increased payload capacity and longer flight ranges, while its robustness ensures durability and survivability during demanding missions. Titaniums ability to withstand harsh environmental conditions, including exposure to saltwater and extreme temperatures, makes it ideal for naval vessels and submarines. Titanium is used in the construction of hulls, propellers, and other critical components, providing strength and corrosion resistance necessary for maritime operations.

Additionally, titanium is integral to the development of advanced weaponry and defence systems. It is used in missiles, rockets, and ammunition due to its ability to withstand high temperatures and pressures during launch and flight. The materials strength and resilience ensure the reliability and precision required for accurate and effective military operations.

The increasing demand for commercially pure titanium and titanium alloys in the aviation industry is due to their lightweight, high strength and excellent corrosion resistance. The growing use of CFRP in airframes and engine parts has led to an increase in demand for titanium, as it has excellent compatibility with CFRP.

Recent changes in market dynamics and the intensifying Russia-Ukraine conflict disrupted the supply chains for several essential components, including titanium. Consequently, finding titanium sponge and other materials may become challenging and expensive. Additionally, as air travel grows and there is an increase in aircraft manufacturing and acquisition, many commercial aircraft units are annually retired or scrapped due to age, producing mountains of waste. These enormous waste loads contain significant quantities of carbon fibre, alloys, aluminium, and other scrap metals.

The outlook for commercially pure titanium and titanium alloys is promising, particularly in the aerospace industry. With higher demand for low-fuel consumption aircraft, which can use more than twice the amount of titanium compared to conventional aircraft, there is a growing need for lightweight and strong materials such as titanium. Additionally, as innovative technologies emerge that require materials with high strength-to-weight ratios and corrosion resistance, including electric vehicles and renewable energy systems, it is likely that there will be greater demand for titanium⁷.

Metal casting industry

The global metal casting market reached USD 151.6 billion in 2022. Looking forward, the International Market Analysis Research and Consulting Group (IMARC Group) expects the market to reach USD 236.7 billion by 2028, exhibiting a compound annual growth rate (CAGR) of 7.4% during 2023-2028. The industrial sectors rising need for metal castings primarily fuels the global market. The increasing process utilisation in the oil & gas, marine, energy, automotive, aerospace, building and medical industries can be used to assist this. Along with this, the industry is also being significantly supported using metal castings to produce uniform products in mining and oilfield equipment, railroads, pipelines and fittings, farm equipment and internal combustion engines. Global demand is growing because of the metal casting processs increased energy efficiency, greater environmental quality and lower production costs⁸.

The Indian metal casting market is poised for substantial growth, with a projected Compound Annual Growth Rate (CAGR) of 6.7% during the period from 2023 to 2028. This growth is primarily driven by continuous advancements in the foundry industry. As India experiences rapid industrialization and urbanization, the demand for metal casting processes has significantly increased across the country. Moreover, the surge in infrastructural development projects has further fuelled the need for cast products, contributing to the positive trajectory of the market. Key players in the industry are playing a crucial role by continually improving metal casting processes through technological innovations and extensive research and development (R&D) efforts, further bolstering the markets prospects in India.

OPERATIONAL HIGHLIGHTS AND KEY TRENDS

PTC Industries remains steadfast in its commitment to achieving Parity in manufacturing materials, components, and subsystems for critical and super-critical applications across diverse industries. In line with this philosophy, PTC established a wholly owned subsidiary called Aerolloy Technologies Limited (ATL) in FY2021, with a focus on producing high-quality materials and parts for the defence and aerospace sectors. ATL is establishing a fully Integrated Material Manufacturing plant for producing titanium and nickel superalloys along with an Aerospace Castings manufacturing facility, to reduce Indias reliance on imports and promote an Aatmanirbhar Bharat. The company has made strategic investments in cutting-edge core manufacturing technologies, giving it a competitive edge in the aerospace and defence sectors.

To further bolster its position, PTC Industries has acquired Vacuum Arc Remelting (VAR), Plasma Arc Melting (PAM), and Electron Beam Cold Hearth Remelting (EBCHR) furnaces, which are crucial for its aerospace and defence endeavours. MoUs with esteemed organizations like BAE Systems, Safran AE, Bharat Dynamics, Mishra Dhatu Nigam, among others, have enabled PTC to secure development orders and supply essential cast metal components. This strategic approach positions PTC Industries as a key player in enhancing Indias indigenous capabilities and contributing to the growth of the aerospace and defence industries.

Some significant developments during the year:

• PTCs wholly owned subsidiary Aerolloy Technologies Limited was allotted 20 Hectares (50 Acres) of land (next to Brahmos facility) in Lucknow node of the UP Defence Industrial Corridor. This acquisition will bring added impetus to the development, indigenization, and establishment of latest cutting-edge manufacturing capabilities for producing strategic materials, components, and sub systems for various Defence and Aerospace applications which will be the growth engine for the company in future.

• PTC Industries successfully completed the acquisition of the Electron Beam Cold Hearth Remelting (EBCHR) furnace with a capacity of 5,000 tonnes per annum, through its wholly owned subsidiary "Aerolloy Technologies Limited (ATL) during the year. This acquisition will pave the way for manufacturing of Strategic and Critical materials for Defence, Aerospace, Medical and Industrial applications indigenously.

• Aerolloy also completed the acquisition of Vacuum Arc Remelter (VAR) furnace for manufacturing Titanium ingots with a capacity of 1,500 tonnes per annum.

• During the year, Aerolloy Technologies was approved by Safran Aircraft Engines ("SAE"), a top global aircraft engine manufacturer, for development and supply of cast components for Aero Engines. Safran Aircraft Engines approved ATL for the development and supply of Titanium and Super Alloy castings for Aero Engines. This is the first time that such critical cast components for Aircraft Engines, in Titanium and Super Alloys, are being sourced by SAE from India.

• Further, Aerolloy and Safran AE signed an MoU to explore opportunities for strategic business cooperation to leverage the complementary talents, technologies and capabilities of both Parties and support development of a robust domestic Defence and Civil Aerospace ecosystem and supply chain in India, consistent with the goals of the Government of Indias ‘Make in India initiative.

• During the year, PTC also signed an agreement with BAE Systems, a British arms, security, and aerospace company, to manufacture titanium castings in India for the Indian 155mm M777 Ultra-Lightweight Howitzer (ULH). Both companies have a plan to progress to manufacture of all three of the major structures (Saddle, Cradle, and Lower Carriage) that form the basis of the gun in India. As a result of its participation in the M777 programme, PTC will also be able to support the global supply chain of BAE Systems.

• Aerolloy Technologies signed an MoU with Dassault Aviation, a French Aerospace company, for prospective supply of Titanium Cast Parts and materials to Dassault. Through this MOU, the two organisations will evaluate the possibility of Dassault Aviation purchasing Titanium and Super Alloy material, components, and castings for Aerospace applications from Aerolloy. These titanium castings and components shall be used for Rafale multirole fighters and other Dassault manufactured aircraft.

• Further Aerolloy Technologies Limited (wholly owned subsidiary of PTC Industries Limited, has been approved by Israel Aerospace Industries (IAI), for supply of cast components for Aerospace applications.

• PTC Industries Limited and Hindustan Aeronautics Limited – SED, Koraput signed an MoU to explore mutual co-operation and development for indigenisation of aviation grade Raw Materials, Components, Sub-systems, and Systems of Russian origin aircraft.

• PTC took up a developmental contract for critical components for DRDO – GTREs Combat Aircraft Engine development program. Considering the Government of Indias directives on ‘Aatmanirbhar Bharat and prevailing geo-political situation, the Ministry of Defences initiative to design, develop and manufacture its own fighter aircraft platforms will result in a greater potential for indigenously developed engines to be used in these platforms.

• PTC also signed an MOU with Bharat Dynamics Limited (BDL), a Defence PSU to explore mutual co-operation and business development for design, development and manufacture of Aero Engines for Missiles, UAVs, Loitering Munitions or any such other fields where small Turbo Engines would be required other than fighter aircraft. The MOU also envisions the formation of an SPV as partners with other Government

/ Semi-Government or Private entities, as agreed to, for the creation of Defence Testing infrastructure in the field of Mechanical & Materials under the Ministry of Defence DTIS Scheme implemented by UPEIDA.

• PTC signed an MOU with Defence PSU Mishra Dhatu Nigam Limited (MIDHANI), a manufacturer of strategic materials for a technical collaboration between both companies for manufacture of titanium alloy pipes, tubes, plates, sheets, and fabrication of various crucial parts and LRUs for defence and aerospace industries.

• PTC received the Clearance Certificate for critical On-Line Fittings (OLFs) for Defence applications in Titanium alloys. Till now, these critical ‘OLFs were being imported but this partnership will now help to reduce imports and build self-reliance.

• This year, PTC also successfully completed the Cyber Essentials certification for BAE Systems - UK and now complies with IASME standards for cyber security.

OPPORTUNITIES AND THREATS

In the dynamic landscape of the aerospace, defence, industrial sectors, PTC Industries has been steadfast in its commitment to achieving ‘Parity in manufacturing critical materials, components, and sub-systems. As a key player in Indias industrial landscape, PTC has embraced numerous opportunities in the last financial year and anticipates further potential for growth and innovation in the future. With a focus on self-reliance and strategic alliances, PTC has carved a niche for itself in the aerospace, defence, and industrial sectors. However, amidst the opportunities lie challenges, ranging from global competition and economic uncertainties to regulatory complexities and supply chain disruptions.

PTC Industries dedication to advancements in core manufacturing technologies and partnerships with renowned organizations positions the company to navigate these challenges effectively while capitalizing on the emerging prospects in the aerospace and defence domains.

Major opportunities that have presented themselves in the last year or are anticipated in the future are:

Growing Demand in Aerospace and Defence: The increasing demand for aerospace and defence components, particularly in Indias domestic market, presents a significant opportunity for PTC. With the governments focus on self-reliance, PTCs capabilities in producing high-quality materials and parts can align well with the countrys objectives to reduce import dependence.

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Global Trends and Environment: Amidst the geopolitical conflicts resulting from the Russia-Ukraine war and the "China Plus One" strategy, PTC Industries finds a unique opportunity to play a pivotal role in supporting Indias efforts towards self-reliance and bolstering its domestic defence and aerospace capabilities. With rising geopolitical tensions and uncertainties, countries are increasingly prioritizing indigenous manufacturing of critical materials and components for their security interests. PTC, through its subsidiary Aerolloy Technologies Limited (ATL) and strategic alliances, is well-positioned to capitalize on this shift in global dynamics.

By offering high-quality materials and parts for the defence and aerospace sectors, PTC can assist India in reducing its dependence on imports and building an Aatmanirbhar Bharat. The companys commitment to advanced manufacturing technologies, including Vacuum Arc Remelting (VAR), Plasma Arc Melting (PAM), and Electron Beam Cold Hearth Remelting (EBCHR) furnaces, positions PTC as a reliable and capable domestic supplier. As geopolitical conflicts prompt nations to reevaluate their sourcing strategies, PTC Industries can emerge as a strategic partner for countries seeking to enhance their domestic defence and aerospace manufacturing capabilities, further solidifying its reputation as a key player in the global aerospace and defence industries.

Strategic Alliances: PTCs collaborations with esteemed organizations provide access to valuable expertise, technologies, and potential joint ventures. These partnerships offer avenues for PTC to expand its market reach, explore new opportunities, and secure development orders.

Advancements in Core Manufacturing Technologies: PTCs investments in cutting-edge core manufacturing technologies give the company a competitive advantage in the aerospace and defence sectors. The acquisition of furnaces like VAR, PAM, and EBCHR enhances PTCs capabilities in producing exotic materials, thereby positioning the company as a preferred supplier for critical applications.

The major threats anticipated for the Company in the future are:

Human Resource Management and Skilling: Human resource management and skilling pose significant challenges for companies in todays rapidly evolving business landscape. As technology advances and industries undergo digital transformations, the demand for specialized skills is continuously changing. Companies, including PTC Industries, face the threat of skill gaps and talent shortages that can impede growth and hinder innovation. To address this challenge, PTC prioritises skilling and upskilling initiatives to equip its workforce with the necessary knowledge and expertise. Implementing comprehensive training programs and fostering a culture of continuous learning is helping it bridge skill gaps and enable employees to adapt to emerging technologies and industry trends. PTC has also undertaken a complete HR Transformation project driven by PriceWaterhouseCoopers in order to develop a robust and capable workforce.

Additionally, to attract and retain top talent in a competitive market, PTC to offer exciting career development opportunities, a supportive work environment and attractive employment terms. By proactively addressing human resource management and skilling challenges, PTC is building a highly skilled and engaged workforce that drives the companys success and sustains its position as a key player in the aerospace and defence industries.

Global Market Competition: The aerospace and defence industries are highly competitive on a global scale. PTC may face competition from established international players with well-established market presence, technological expertise, and established customer relationships. PTC proactively addresses global competition by continually enhancing its offerings, streamlining operations, and fostering innovation. PTCs investment in research and development helps it to stay ahead of technological advancements and take advantage of cost efficiencies and remain competitive.

Economic Uncertainty: Economic fluctuations and uncertainties, such as the impact of the COVID-19 pandemic, can affect the demand for aerospace and defence products. PTC needs to be prepared to navigate through market fluctuations and potential disruptions. To mitigate the impact of economic fluctuations, PTC adopts flexible business strategies and keeps its customer base diversified. Building long-term relationships with key clients and focusing on value-added services can help buffer the Company against economic uncertainties.

Regulatory Challenges: The aerospace and defence sectors are subject to stringent regulatory requirements and standards. Compliance with these regulations may pose challenges, especially in international markets where PTC aims to expand its presence. PTC maintains a robust compliance framework, staying abreast of evolving regulations, and investing in training and certifications to ensure adherence to quality standards and mitigate this threat.

Supply Chain Disruptions: PTC may face potential supply chain disruptions due to factors such as raw material shortages, logistics issues, or geopolitical tensions. Ensuring a robust and resilient supply chain is crucial to mitigate these risks. PTC has established alternative sourcing options and fosters strong relationships with reliable suppliers. Developing contingency plans and monitoring the supply chain closely has helped the Company mitigate the risks associated with raw material shortages or logistical challenges.

Despite the challenges posed by global competition, economic uncertainties, regulatory complexities, supply chain disruptions, and the ever-changing landscape of human resource management and skilling, PTC Industries stands strong with a positive outlook. The numerous opportunities in the aerospace and defence sectors, combined with strategic alliances and investments in cutting-edge technologies, position PTC for continued growth and success.

With a commitment to achieving ‘Parity in critical manufacturing and a focus on self-reliance, PTC is well-prepared to navigate these challenges adeptly. By implementing proactive mitigation measures and fostering a culture of innovation and learning, PTC is confident in its ability to address these threats capably and emerge as a trailblazer in the industry. As the company continues to seize opportunities and overcome obstacles, it remains poised to shape a resilient future and contribute significantly to Indias quest for self-sufficiency, especially in the aerospace and defence domains.

RISKS AND CONCERNS

PTC adopts a prudent and cautious approach towards identifying, analysing, and monitoring business-related risks. The company has institutionalized a robust risk management process that focuses on risk identification, reduction, and mitigation. With well-defined risk management procedures in place, PTC can promptly respond to potential hazards and limit their impact. The managements primary objective is to provide stakeholders with the assurance that the company comprehensively understands and effectively manages its risks. As part of this process, PTC has identified the following major risks that need careful attention and proactive management.

Strategic risks

PTC Industries faces a range of strategic risks that require careful consideration and proactive measures. Market risks, including uncertainties in the global economy and fluctuations in demand within domestic industries like infrastructure and power, pose significant challenges. Projects may be delayed or abandoned during prolonged periods of poor market conditions. To address these risks, PTC has strategically diversified its portfolio, allowing the company to focus on different markets, clients, and industries. This diversification has proven crucial in sustaining performance, as the companys varied geographic footprint and product portfolio mitigate the impact of falling market categories. By aligning its operations with multiple sectors, PTC can better withstand market fluctuations and capitalize on emerging opportunities across diverse industries. The companys strategic risk management framework enables it to navigate uncertainties, capitalize on its diversified strengths, and remain resilient in the face of ever-changing market dynamics.

Operational risks

PTC Industries encounters various operational risks that can impact its day-to-day activities and overall business performance. These risks include supply chain disruptions, production challenges, quality control issues, and workforce-related concerns. To address these risks effectively, PTC adopts a comprehensive approach encompassing several key measures:

• Supply Chain Resilience: PTC acknowledges the importance of a robust and resilient supply chain. The company works closely with suppliers to establish long-term partnerships and diversify sourcing options. By maintaining multiple sources for critical materials and components, PTC mitigates the impact of disruptions in the supply chain, ensuring uninterrupted production.

• Advanced Manufacturing Technologies: PTC continuously invests in cutting-edge manufacturing technologies and processes. This focus on innovation enables the company to enhance production efficiency, reduce operational risks, and deliver high-quality products to customers. By staying at the forefront of technological advancements, PTC adapts to changing market demands and improve overall operational performance.

• Quality Control and Compliance: Ensuring product quality and compliance with industry standards is a top priority for PTC. The company has stringent quality control procedures in place, conducting rigorous testing and inspections at every stage of the manufacturing process. Compliance with regulatory requirements and adherence to international standards further demonstrate PTCs commitment to delivering reliable and safe products.

• Workforce Development and Training: PTC recognizes the importance of a skilled and motivated workforce. The company invests in employee training and development programs to equip its staff with the necessary skills and knowledge. By nurturing a culture of continuous learning, PTC ensures its workforce remains adaptable and capable of meeting evolving operational challenges.

• Contingency Planning: PTC actively engages in contingency planning to address potential operational disruptions. By identifying potential risks and developing contingency plans, the company responds promptly to unforeseen events and minimize their impact on business operations.

• Operational Efficiency: PTC places a strong emphasis on operational efficiency and process optimization. Through continuous improvement initiatives, the company identifies areas for enhancement and streamlines its operations to achieve greater productivity and cost-effectiveness.

• Health and Safety Measures: PTC prioritizes the health and safety of its employees and stakeholders. Stringent health and safety protocols are implemented across its facilities to create a safe working environment, reducing the likelihood of accidents and operational disruptions.

Financial risks

PTC Industries encounters various financial risks that can impact its financial stability, liquidity, and profitability. These risks include currency fluctuations, credit risk, interest rate risk, and cash flow uncertainties. To address these risks effectively, PTC implements a comprehensive financial risk management approach, encompassing several key measures:

• Currency Hedging: PTC follows a prudent and non-speculative approach in formulating its foreign currency management and hedging strategies to mitigate the impact of foreign exchange rate fluctuations. By carefully hedging against currency risks, the company ensure that its cash flows are stable and protects its financial performance when dealing with international transactions.

• Credit Risk Assessment: PTC conducts thorough credit risk assessments for its customers and suppliers. By evaluating creditworthiness and working with large OEMs and reputed customers and suppliers, the company keeps the risk of non-payment and potential losses from bad debts to a minimum.

• Debt Management: PTC maintains a prudent approach to debt management, ensuring a manageable level of debt and efficient use of capital. The company considers the cost of debt and its impact on financial flexibility while making financial decisions. The Company has also significantly reduced its debt through equity infusion during the year which will support the companys expansion and capital expenditure plans.

• Cash Flow Forecasting: PTC emphasizes accurate and regular cash flow forecasting. By anticipating future cash inflows and outflows, the company identifies potential cash flow gaps and proactively takes measures to ensure sufficient liquidity.

• Financial Contingency Planning: PTC engages in financial contingency planning to prepare for unexpected financial challenges. By identifying potential risks and developing contingency plans, the company ensure that it can respond promptly to adverse events and safeguard its financial position.

• Transparency and Reporting: PTC maintains a high level of transparency in its financial reporting and adheres to international accounting standards. Transparent financial reporting builds trust with stakeholders and facilitates better risk assessment and management.

Compliance risks

PTC Industries encounters various compliance risks, given the stringent regulatory environment governing the sectors and geographies that it operates in. These risks encompass the complexities of adhering to international standards, export controls, data protection, responsible reporting, adequate governance, transparency, and ethical business practices. To address these compliance risks effectively, PTC adopts a comprehensive approach to ensure full compliance with applicable laws and regulations.

Firstly, PTC implements a robust compliance framework, with clear policies and procedures that outline the companys commitment to ethical conduct and regulatory adherence. These policies are communicated to employees at all levels, fostering a culture of compliance and ethical behaviour throughout the organization.

Secondly, the company invests in training and development programs to educate its employees about the specific compliance requirements relevant to their roles. By promoting awareness and understanding of compliance obligations, PTC ensures that employees are equipped to make informed decisions while conducting business operations.

Thirdly, PTC maintains a dedicated compliance team responsible for monitoring and evaluating the companys adherence to relevant regulations. This team conducts regular risk assessments, audits, and compliance reviews to identify potential gaps and areas for improvement.

Furthermore, PTC engages in periodic third-party compliance audits to ensure independent validation of its compliance efforts. These audits help identify any potential non-compliance issues and provide recommendations for enhancing compliance measures.

The company also collaborates with legal advisors and industry experts to stay updated on evolving compliance regulations and best practices. By actively engaging with external experts, PTC proactively addresses emerging compliance challenges and ensures alignment with the latest standards. The risk mitigation plans are reviewed regularly by the Audit Committee of the Company. The Companys contingent liabilities are disclosed in Note 41(ii) Contingent Liabilities of Notes to Accounts.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

PTC Industries places a strong emphasis on maintaining robust internal control systems to safeguard its operations, assets, and stakeholders interests. The companys internal control framework is designed to ensure adherence to policies, compliance with regulations, and the achievement of operational efficiency. PTCs internal control systems cover various aspects of the organizations operations and are continuously reviewed and updated to address emerging risks and challenges.

The adequacy of PTCs internal control systems is evidenced by several key factors.

• The company has established clear and well-documented policies and procedures that govern its business processes. These policies outline the roles and responsibilities of employees, ensuring accountability and transparency at all levels of the organization.

• PTC maintains a dedicated internal audit function that conducts regular assessments of the effectiveness of the internal control systems. These internal audits help identify any weaknesses or gaps in controls, allowing prompt corrective action to be taken.

• The companys management actively monitors the implementation of internal controls and engages in regular risk assessments. By identifying and addressing potential risks proactively, PTC demonstrates its commitment to maintaining a strong control environment.

The companys commitment to internal controls is further reinforced by its adherence to international accounting standards and best practices. PTC continuously seeks to align its internal control systems with global benchmarks, ensuring its operations meet the highest standards of corporate governance. Effectiveness and efficiency are prioritized through streamlined processes, automation, and continuous improvement initiatives. PTC regularly assesses the efficiency of its operations, identifying opportunities for optimization and cost-effectiveness. By fostering a culture of continuous improvement, the company strives to enhance its operational efficiency and deliver value to its customers.

Safeguarding of assets is a critical component of PTCs internal control framework. The company implements robust asset management policies, including physical security measures and inventory controls, to protect its assets from theft, damage, or misuse. Regular audits and assessments ensure that asset safeguards are adequate and effective.

To ensure compliance with applicable laws and regulations, PTC has a dedicated compliance team that monitors and evaluates the companys adherence to relevant requirements. Compliance reviews, audits, and risk assessments are conducted regularly to identify areas for improvement and promptly address any compliance issues.

PTC takes proactive steps to review and improve its internal controls regularly. The company conducts periodic internal audits and engages external auditors to provide independent assessments of its internal control systems. The findings and recommendations from these audits are carefully reviewed by management, and corrective actions are implemented as needed.

The Audit Committee of the Board oversees the adequacy of internal control through regular reviews of the audit findings and monitoring the implementation of internal audit recommendations. PTCs internal control systems undergo continuous monitoring and evaluation to adapt to changing business environments and emerging risks. Management engages in risk assessments to identify potential threats, and risk mitigation strategies are devised and implemented accordingly.

The Companys internal financial controls were also tested and reviewed by the Management and the statutory auditors during the year in accordance with the Companies Act, 2013. They were found effective and adequate for the size and operations of the Company.

Total Income

D in Crore

Employee benefits expense

D in Crore

Payments and provisions for employees saw an increase of 24%.

Other expenses

D in Crore

Manufacturing expenses increased by 2.8% while Administrative and Selling expenses increased by 59.20%

Finance costs

D in Crore

Finance costs rose by 4% during the previous year.

Fixed assets

D in Crore

Fixed assets increased by 13.63%.

Inventories

D in Crore

The overall increase in inventory of 20% is due to the increase in operations and is also partially influenced by rising metal prices.

Sundry debtors

D in Crore

Sundry debtors increased by 6.81%.

Loans and Advances

GEOGRAPHICAL SALES

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS

Human resource development is a cornerstone of PTC Industries business strategy, recognizing the significance of its skilled and motivated workforce as key drivers of future growth. At the heart of PTCs Human Resource Management (HRM) policy lies the belief that its people are central to the companys success. As such, PTC is committed to providing its employees with ample opportunities for growth, personal development, and a high quality of life, thereby maximizing their potential and productivity. The company fosters a workplace culture that values openness, fairness, and respect, encouraging collaboration and teamwork among employees.

To encourage continuous improvement and increased productivity, PTC adheres to best practices and employs an efficient motivation system, empowering employees to perform at their best. To further strengthen its human resource capabilities, PTC has made significant efforts to amplify its senior and middle management levels, hiring accomplished professionals with substantial expertise in their respective fields. The company places great importance on raising the personal interest of each employee in achieving optimal results and has undertaken a CSR project on Technical Skilling for a wide range of operational and non-operational skills. Under this initiative, PTC is building a repository of skilling courses to develop competent workforce in its community for advanced manufacturing practices, benefiting from industry experts who conduct periodic trainings and enhance the capabilities of a larger population.

PTC believes that the success of its business relies on effectively utilizing the talents of its employees. Efforts to build the capability of employees at all levels is continued with improved organisational capability in technical, functional, and operational areas. The workforce is continuously trained on advanced mechanisation and world-class manufacturing techniques and processes. In its role as a global knowledge-based Company, PTC has always been of the firm belief that its business cannot grow without unlocking the full potential of its employees effectively.

To achieve operational excellence, PTCs HRD plan encompasses various parameters, such as creating a sense of belonging and maximizing each employees contribution while preparing them to overcome business challenges. The company encourages a culture of continuous learning and improvement, providing employees with the freedom to enhance their proficiency.

During the year, PTC has undertaken an HR Transformation Project in collaboration with PriceWaterhouseCoopers. Through this project, PTC is working to elevate its human resource and its capabilities. The Company is redesigning its organizational structure to align with its strategic goals, automate and map its processes for a large number of operational and non-operational functions, and conduct competency assessments to identify skills gaps and development needs among its employees. The Companys performance monitoring and evaluation framework will also be enhanced to drive data-driven decision-making and align individual performance with overall organizational objectives.

By undertaking this comprehensive HR transformation project, PTC Industries envisions a more agile, efficient, and talent-driven HR function, capable of supporting the companys long-term growth and sustainability. The projects emphasis on organization design, process optimization, competency development, and performance evaluation will empower PTCs HR team to drive meaningful change, nurture talent, and position the company as an employer of choice in the industry. This transformational initiative will play a vital role in propelling PTC towards a future marked by excellence, innovation, and success.

PTC Industries holds safety as a paramount priority, with a resolute goal of achieving zero injuries and incidents. The company takes a responsible approach to its operations, placing great importance on the safety and well-being of its people, suppliers, vendors, and the communities where it operates. To ensure a safe working environment, PTC has established a fully equipped and well-qualified Environment, Health, and Safety (EHS) structure. This EHS framework provides the necessary governance, documentation, and assurance to uphold rigorous safety standards across the organization.

Over the course of six decades, PTC has maintained a harmonious relationship with its workforce, exemplifying a strong industrial harmony. This dedication to people practices has cultivated cordial industrial relations throughout the organization. The companys commitment to nurturing a cohesive and supportive work environment is further enhanced by the collaboration and assistance from its well-trained and experienced personnel across all levels of the hierarchy.

PTC attributes its position as a frontrunner to the unwavering commitment, innovation, engagement, and desire for excellence displayed by its people. The workforces keen sense of belongingness to the organization fosters a culture of dedication and ownership, driving the companys success.

The total strength of employees on the roll in the Company at the end of the year was 519.

STATUTORY COMPLIANCE

The Directors make a declaration regarding the Companys compliance with the provisions of various statutes after obtaining confirmation from all the units of the Company. The Company Secretary ensures compliance with SEBI regulations and the provisions of the Listing Regulations. The Company Secretary is appointed as the Compliance Officer.