snl bearings ltd share price Management discussions

Industry Structure and Development

Your Company operates in the anti-friction bearings industry and the major industrial users of antifriction bearings are automobiles, general engineering, railways, electrical equipment manufactures etc. Your Company manufactures mostly needle bearing products and operates in the following market segments:

1. Automotive OEM 2. After Market 3. Exports

For your Company, the demand is approximately 90% from Original Equipment Manufacturers (OEM) and the balance is for supplies to the replacement market / exports.

Market growth in the Indian mobility industry has a very large potential given the geographical spread, size of population and the current low penetration. Growth in the goods mobility segment is being driven by the need to establish strong supply chains between producers and markets. Improvements in road infrastructure also assist this area of business. India also has strong potential to become export hub for all segments.

The Company is well-positioned to leverage opportunities post Covid crisis. Firmly driven by its strategic focus on upgrading manufacturing facility and skilled workforce equipped to face the future with its strong resolute. This enables the Company to offer a comprehensive product portfolio to its customers, emphasizing high-quality standards and service aids, delivering value and sustainable growth.

The overall growth of the bearing industry is correlated with the automotive and industrial sectors. The demand for the bearings is derived from two key user segments - the automotive and industrial sectors. A major portion of bearings market in India is unorganized that caters to the low-end replacement market. Several main industrial sectors and user segments are expected to push the production of industrial equipment and automotive, leading to an increase in demand for automotive component, equipment and vehicles in the developing countries.

The automotive industry is the largest consumer of bearing products and your Company supplies to all the segments viz; 2/3 wheeler, passenger cars, commercial vehicles and farm equipment segments. Tractors performed much better than other segments as rise in government spending on new infrastructure and construction buildings increases the demand for tractors for transportation applications as well as increase demand of tractors for agricultural activities which in turn, drive the growth of the Indian tractor market.

Your Companys installed manufacturing capacity will enable it to continue offering a wide range of products to its customers once demand revives. Customer relationships and personal contact are the focus areas to re-assure them that quality products delivered in a timely and cost efficient manner which will be our priority.

Economic Environment/Outlook

International Monetary Fund (IMF) in its report on the global economic outlook states, "The global fight against inflation, Russias war in Ukraine, and a resurgence of COVID-19 in China weighed on global economic activity in 2022, and the first two factors will continue to do so in 2023." The latter part of last year saw some of these risks moderate and IMF has raised its growth forecasts in January of this year compared to what they had made in October last year. Global growth is projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, then rise to 3.1% in 2024. The forecast for 2023 is 0.2% higher than predicted in the October 2022. Inflation, the main culprit slowing down the global economy, is also expected to moderate. Global inflation is expected to fall from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024, still above pre-pandemic (2017-19) levels of about 3.5%.

Europe was greatly affected by the war in Ukraine. Demand dropped while sanctions on Russia led to unprecedented increase in gas & power prices, fueling inflation. Central banks raised interest rates, and this further eroded demand. Power prices have moderated more than expected as Europe moved to replace Russian gas with other sources while optimizing electricity consumption, which was helped by a warmer-than usual winter. But inflation remains a concern. Growth in the euro area is projected by IMF to bottom out at 0.7% in 2023 before rising to 1.6% in 2024. There is an increase of 0.2% in 2023 forecast compared to October 2022.

IMF also estimated that growth in India is set to decline from 6.8% in 2022 to 6.1% in 2023 before picking up to 6.8% in 2024. The Indian economy has shown resilience amidst external headwinds and a weakening global economic scenario. This years budget highlighted comfortable fiscal deficit figures and excellent tax collections. Budget forecasts for the coming financial year have been based on conservative assumptions, showing that the economy is on a strong footing. For the last few years, the government has focused on infrastructure development and its capital expenditure plan reflects this. Capex spending by the government has steadily increased in the last few years and is expected to be the highest in FY24. The private sector has also seen a capex revival with credit growth being at a four year high, even as the balance sheets of both banks and corporates remain healthy. Some of the optimism needs to be tempered. Many commentators expect the new income tax regime to put more money in the hands of people and increase consumption, but confusion between the old and new regimes persist and the jury is still out on the new regime. Domestic consumption could also moderate in FY24 due to the combination of - slower global growth, lagged effect of interest rate hikes and dissipation of revenge consumption, that followed the lifting up of restrictions during the covid pandemic. Inflation continues to be higher than comfortable and rural incomes have only recovered moderately. The prospect of a K shaped economy with consumption growth in the lower income categories lagging others, is real.

Opportunities and Threats

The long term prospects for the Indian economy remain bright owing to the growth of internal consumption. Demand for personal vehicles will be driven by the aspirations of the rising middle class with improving purchasing power and disposable incomes. Rapid urbanization will drive the need for public transportation. As India addresses the twin challenges of inclusive growth and sustainability, even a normal monsoon, with improved availability of rural finance, will positively influence demand for motor cycles as well as agricultural tractors. The overall mobility sector is expected to benefit from continued growth in the longer term.

The domestic bearing industry is facing the following threats:

a. The menace of spurious bearings continues to adversely affect the industry. As per estimates roughly one in every four bearings sold in the replacement market is fake/of inferior quality presenting a threat to unsuspecting users. The problem continues owing to the slow legal process, in spite of industry wide efforts to thwart the unscrupulous suppliers.

b. With global demand weakening resulting in idle/low utilization of installed capacities, the industry has to work on enhancing operational efficiencies and flexing costs further with supply chain readiness to help counter these additional costs.

c. Regulatory demands on emission levels, improved safety norms, higher expectations for improved reliability of the vehicles and the need for readiness to meet requirements for the new fuel efficient and environmental friendly vehicles may result in need for investments in newer technology, research and development. This could cause a higher burden of fixed costs.

Of course, the industry and your Company have to continuously explore ways and take all measures to produce consistently high quality products cost effectively to counter the threat of cheap imports.


Your Companys revenue (net) was at Rs. 4,787 lakhs in FY 2022-23 (Previous Year: Rs. 4,351 lakhs) representing a growth of 10%. Profit after tax was at Rs. 818 lakhs (Previous Year: Rs. 883 lakhs), a decrease of 7%. There has been a renewed focus on broad basing the customers served so as to optimally utilize the companys installed capacities and also develop new products to be ready to service the new hybrid and electric vehicle models being introduced. This will help the Company to achieve its long term strategic objectives to grow rapidly.

With overall leveraging of operational efficiencies and under the given market conditions, the financial results during the year are considered satisfactory.

Risks and risk mitigation

To sustain long term competitive advantage for the Company, the Company has comprehensive risk management processes for identification, assessment and mitigation of all potential business risks which include operational, financial, legal and strategic risks. Depending on probability of occurrence and extent of potential damage, these risks are categorized as material risks and non-critical risks. These are periodically presented to the Board. Risk mitigation measures and their implementation are regularly reviewed and discussed, and after evaluation, improved and updated.

The macro concerns which could significantly impact industry performance during the year are inflation, fiscal deficit and currency risks, governments inability to build and expand critical infrastructure and the adverse impact of the FTAs which have resulted in higher imports of auto components and could therefore negatively impact the industrys plans to achieve the targeted size of US$ 200 billion (12% of GDP) by 2026 under the Automotive Mission Plan. On the positive front, we have the generous package announced by the Government to boost demand, the key measures being cut in corporate tax rates, reforms in banking and financial services, liberalized lending norms at substantially reduced rates, higher crop prices for farmers for their agricultural produce. The silver lining is the good monsoon forecast which should lead to rise in rural incomes and result in higher consumer demand, and the possible shift in manufacturing from China with India being one of the major beneficiaries.

Companys internal auditors review the internal controls, risk assessment and mitigation procedures, independently as part of their internal audit process and their observations and findings are presented, reviewed and discussed in the audit committee meeting.

The Plant head and his team with continuing interactions with the functional heads of the holding Company, is charged with driving operational efficiencies and optimizing efficient allocation of financial resources - prudent and judicious capex, better inventory management and minimizing overdues.

Internal control systems and adequacy

The Company has in place adequate internal control systems which ensures reliable financial reporting, safeguarding of assets, adherence to management policies, the detection and prevention of frauds and errors, adequacy and completeness of accounting records and timely preparation of reliable financial information. The efficacy of the internal checks and control systems are validated by internal as well as statutory auditors. The upgrade of the ERP system to NAV 16 has helped the Company to implement latest world class processes and make it more analytical.

The management assesses the appropriateness and effectiveness of the Controls in place on yearly basis.

Some of the significant features of the internal control systems are:

a. Internal auditors who in addition to transaction audit cover operational audit and review business processes and performance.

b. Standard operating procedures and guidelines have been reviewed in the light of the ERP upgrade to ensure tighter controls. Improvements / modifications are being effected to meet with changes in business conditions, statutory and accounting requirements.

The Audit Committee closely interacts with and guides management and along with statutory auditors and internal auditors reviews significant findings and follows up thereon.

Segment wise Performance

During the current year, ball and roller bearings have been the primary business segment for the Company.

Industrial Relations and Human Resource management

The Companys industrial relations with employees at its Ranchi plant continued to be cordial and peaceful. The settlement with the workmen has been renewed on March 24, 2022 for 3 years with effect from January 1, 2022 to December 31, 2024, wherein the managements proposal for an overall production rise of 15% has been accepted and also provides for deductions for bad quality products produced. These provisions will help in keeping employee costs under check.

As an organization, your Company is evolving with its HR practices and policies to improve on employee engagement and experience. We strive to provide a good working environment to our employees such that they have ample opportunities to further their skills. A key focus is to maintain harmonious relations with employees at all plants in all geographies. The organization has put in place a Diversity, Equity and Inclusion conceptual model and has adopted appropriate targets in line with the practices of CIE Automotive globally. Our Employee Value Proposition (EVP) is centred on four pillars of Care & Wellness, Advancement opportunities for Career Growth, Respect & Dignity and Structured Reward and Recognition.

Permanent employees directly employed by the Company currently are total 154 in number.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.