supreme engineering ltd Management discussions


1.1 Statements in this Management Discussion and Analysis of Financial condition may contain certain "forward-looking statements". These forward-looking statements generally can be identified by words or phrases such as "aim", "anticipate", "believe", "expect", "estimate", "intend", "objective", "plan", "project", "will", "will continue", "will pursue" or other words or phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or goals are also forward-looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement.

1.2 Actual results may differ materially from those suggested by forward-looking statements due to risks or uncertainties associated with expectations relating to, inter alia, regulatory changes pertaining to the industries in India in which we operate and our ability to respond to them, our ability to successfully implement our strategy, our growth and expansion, technological changes, our exposure to market risks, general economic and political conditions in India which have an impact on its business activities or investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in the industries in which we operate.

1.3 These forward-looking statements and any other projections contained in this report (whether made by us or any third party) are predictions and involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements to be materially different than those contemplated by the relevant forwardlooking statements.


2.1 Supreme Engineering Ltd was established in 1987 and was formerly known as Supreme Heatreaters Pvt Ltd. Supreme Engineering Ltd has two divisions - (1) Special Steels division located at Khopoli, and (2) Wire Division located at Navi Mumbai.

2.2 The special steel division was set up in 2008 to develop critical alloys in India and work as an import substitute for the strategic sectors such as Defence, Space, Atomic Energy, Aerospace, Power, Oil& Gas etc. The products manufactured by the special steel division are highly technical and used to manufacture the most critical parts.

2.3 The wire division was set up in 1987 and is involved with the manufacturing of wires, profiles, bright bars. The industries served include automotive, oil & gas, hand tools, textile machinery and other engineering applications. Thus unit has long standing relations with customers where many of the customers have been with the company from the time of inception.


3.1 The constant endeavor to provide high quality material indigenously for the strategic use by India motivates our organization to follow the best quality management systems and policies to meet the required targets

3.2 The main departments include Quality, Production, Production planning & control, Marketing, R&D, Business Development, Purchase, Industrial Engineering, Finance, Accounts, Logistics and HR.

3.3 Production Facilities:

3.3.1 The manufacturing facilities at special steel division include Vacuum Induction

Melting, Electro-slag refining, Radial Forging, Rolling Mill, Bright Bar plant, Heat- treatment furnaces.

3.3.2 The manufacturing facilities at wire division include wire drawing, coil to coil peeling, grinding, heat-treatment furnaces, decoiling, profile shop, pickling, and passivation.

3.3.3 The primary raw material used by the plants include Nickel, Molybdenum, Chromium, Tungsten, Cobalt, Low carbon mild steel scrap, Stainless Steel billets, Alloy Steel billets and Alloy Steel wire-rods.

3.3.4 The product portfolio is as follows:

Super Alloys Stainless Steels Alloy Steels Tool Steels
Nickel based Austenitic Low alloy High speed steels
Iron Based Martensitic Ultra high strength Cold working
Cobalt based Ferritic ESR re-melted Hot working
PH PH Ball-bearing


4.1 Supreme Engineering Ltd supplies currently to both the commercial as well as strategic sectors. Commercial sectors include Oil & gas, automotive, hand-tools, textile machinery, engineering industry etc. The strategic sectors include Defence (Aircrafts, Battle Tanks, Rockets, Missiles, Ships), Space (rockets, launch systems), Atomic Energy (Reactors, Tools for ancillary machinery), Power (Turbines, Boilers) etc.

4.2 There is a constant endeavor of the company to increase the business of supply to the strategic sector. There has already been a growth of 41% in this sector in the past 2 years.


5.1 Supreme Engineering Ltd will continue to focus on increasing business in the strategic sectors of India

5.2 With a even greater emphasis on make in India and import substitution, there is a huge opportunity opening up in fields of space, defence and thermal power

5.3 With the certification of AS9100 D, various new opportunities have been opened. The company is at various stages of approvals in civil aviation sector and expects this business to grow with a thrust on offset policies by the government of India.

5.4 The wire division aims to develop bright bars, fine wires and special profiles that would further increase the value add in the product.


6.1 The risks facing the business include dependability on government spending, raw material volatility, late delivery penalties and possibility for competition in the near future.

6.1.1 There is a dependency on the business in the strategic sector based on government policies and spending. With changing security priorities and general economic conditions there may be a shift in the budgets and spending. This risk is being mitigated by diversifying the business with supplies to other sectors and for civil aviation

6.1.2 The raw materials used by the production are volatile in nature and the prices vary on a regular basis. This may have an impact on the profit margins. The risk is being mitigated by conduction supply chain, purchasing and inventory optimization.

6.1.3 Many of the governments contracts are bound by late delivery penalty clauses. The risk is being mitigated by better utilization of capacity, improved production planning and planning to keep some inventory in stock based on forecast

6.1.4 Since the strategic sector in India has been growing rapidly, there is a high chance for competition in the near future. The risk is being mitigated by creating further barriers to entry by getting more stringent approvals particularly from the civil aviation sector.


7.1 Strengths

7.1.1 Technical capability to manufacture advanced alloys scarcely available in the country

7.1.2 Approvals from major OEMs in the strategic sector

7.1.3 Long standing relations with customers

7.1.4 Flexibility and versatility available in production facility

7.2 Weakness

7.2.1 Difficulty in forecasts due to made-to-order production

7.2.2 Long working capital cycles and inventory due to multiple inspection stages

7.2.3 Dependence on government policies

7.3 Opportunities

7.3.1 Increase in demand in aerospace & defence due to various policies adopted

7.3.2 Preference to Indian manufacturers under "Make in India" program

7.3.3 Benefits from being MSME

7.3.4 Possibility to scale up without investment in capital

7.3.5 Increased thrust on localization due to geo-political scenario

7.4 Threats

7.4.1 Competition from new entrants

7.4.2 Volatility of raw material prices

7.4.3 Raw material import restrictions for the wire plant