Timken India Ltd Management Discussions.

ECONOMIC OVERVIEW o Global Present Scenario

According to the International Monetary Fund (IMF), the global economy was reeling in slowly, but steadily, after registering a modest growth of 2.9% at the close of 2019. The world was ready to usher in the new financial year with renewed hope only to witness an unprecedented setback in the initial phase of Q1 2020 due to the growing COVID-19. Inadvertent lockdowns further heightened tensions as growth rate estimates dwindled from -3% in Apr20 to -4.9% in Jun20. The global economy, however, observed a turn-around with measured re-opening of markets and with the international roll-out of vaccinations, the growth contraction for 2020 is at -3.3% in Mar21, 1.1% higher than the projected forecast in Oct20 and 0.2% higher than the forecasted value in Jan21. (Source: International Monetary Fund World Economic Outlook April 2021).

Global Growth (%)


Further to this, IMF in its World Economic Outlook April 2021 report has projected that global economy will grow at 6% in 2021 and 4.4% in 2022, which strongly reflects economy recovery and positive outlook for the global economic growth. The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis.

o India

Present Scenario

India is one of the strongest contenders in the emerging markets and developing economies of the world. IMF in its World Economic Outlook April 2021 report projected that Indian economy saw a de-growth of 8% compared to previous forecast of 10.3% de-growth reported in Oct20 wherein this deficit can be attributed to the Government imposed lockdown to contain the viral spread, sluggish manufacturing growth and restrained demand from the previous year.


Indias manufacturing sector activity rose to a near eight-year high in Jan21, driven by sharp rise in new business developments amid a rebound in demand conditions that led to a rise in production and hiring activity. Purchasing Managers Index (PMI), dropped to a seven month low 55.4 in Mar21 from 57.5 in Feb21 and from 57.7 in Jan21 owing to renewed lockdowns to curtail a resurgence in COVID-19 cases which dampened domestic demand (Source: IHS Markit India Manufacturing). However, new business opportunities as a viable alternate source have projected a steady rise in GDP to 12.5% in 2021 and 6.9% in 2022 (Source: International Monetary Fund World Economic Outlook April 2021). Government of Indias focus on renewable energy ensured very good growth in manufacturing of wind turbine and related aggregates during 2020-21. Indian Railways ambitious plans of modernization, electrification and safety, apart from others, has generated significant demand for infrastructure and rolling stock build. The road to recovery for India is a challenging one, one which requires swift reforms and monetary support to boost sustainable growth.


The global bearing market is projected to touch USD 186.1 billion by 2025 thereby registering a CAGR of 9.1% between 2014 and 2025 (Source: Grand View Research, Inc., Report). Bearings are an integral component of all equipments and the ever so rising demand is a derivative of its diversified application in the global manufacturing sector namely the automotive and industrial sector.

The estimated consumption of anti-friction bearings in India is about INR 95-105 billion. India is an emerging economy and the market is optimistic for a revival in GDP in the foreseeable future. The budget allocation to infrastructure will boost the demand for commercial vehicles. The Governments pledge for an Atmanirbhar Bharat has encouraged the bearing manufacturers with local manufacturing capability.

o Indian Automotive Industry

The automotive sector, a major sector for consumption of bearings was approximately valued at INR 70 billion in 2019 and witnessed an acute slowdown followed by COVID-19 induced lockdowns which culminated in approx-24% decline over 2019. Vocal for Local movement has encouraged auto-ancillary manufacturers to enhance their capabilities to decrease dependencies on imports and the segment is likely to grow to 156.8 billion by 2024, registering a CAGR of 18% between 2020 and 2024. The commercial vehicle (CV) sector will soon be a witness to Indias emergence as a segment leader and is expected to register a CAGR of 2.97% from 2018 to 2030.

As per flash figures published by Society of Indian Automobile Manufacturers (SIAM), production of commercial vehicle saw de-growth of 34.8% during Apr20-Dec20 compared to the previous year period mainly due to pandemic.

o CV and Tractor Sales (In Thousands)

Sales Apr19- Dec19 Apr20- Dec20 % Change
Commercial Vehicles 617 388 -37%
Tractors 622 721 16%


Source: SIAM Dec20 Flash Report

Tractor Manufacturers Association

The Government of India announced a scrappage policy which aims to phase out CVs older than 15 years and certified unfit for usage. This insightful approach of phasing out old vehicles will create demand for new purchases of BSVI launches thereby supporting an ailing auto-industry and improve pollution levels. Further, manufacturing sector will benefit in terms of reduction of costs coming in the form of recycling of steel, plastic and copper.

o Indian Industrial Sector

The key indicator to a countrys economic advancement is the growth of its industrial sector. The Government intends to solidify its Make in India foundation to energize manufacturing and increase the contribution to GDP. Indias Index of Industrial Production (IIP) experienced a varied trend in 2020 owing to COVID-19 based fluctuations in the Indian Economy. In Feb20 IIP Y-o-Y growth saw a steep rise to 6.4% but fell to -37.9% at the peak of the pandemic in Apr20. The recovery period brought back IIP growth rate to 0.9% in Jan21 which again dropped to -4.6% in Feb21. The witnessed downtick in the recovery period can be attributed to resurgence of lockdown restrictions (Source: Report released by Office of the Economic Adviser)

o Growth Rates (on Y-o-Y basis in per cent)

The Government of India continues to provide higher thrust to the manufacturing sector in India. Besides improving the overall environment for doing business, various measures have been announced to boost investment in the sector. Multiple nation-wide projects and initiatives such as development of industrial corridors, smart cities and ‘Make in India, among others, are likely to aid performance of the industrial sector over the next few years. Additionally, a host of measures are underway to strengthen Indias railway infrastructure. This includes upgradation of railway stations, building and expanding metro stations and replacing older coaches. Union Budget 2021 has allocated INR 1.10 lakh crore to the Indian Railways as the transporter focuses on building more dedicated freight corridors and target of 100% broad-gauge route electrification completion by December 2023.

l Business Review

Your Companys, active operations are in anti-friction bearings, mechanical power transmission products and related services business. A feather in the cap is the recognition of the parent organization as Timken India comes from the umbrella of a 120-year-old US-based The Timken Company which has been recognized as one of the worlds most ethical companies by the Ethisphere Institute for the eleventh time.

Your Company has been increasing its customer footprint by delivering state-of-the-art products and services in India by the virtue of a future ready workforce and world-class manufacturing facilities. Your Companys expansive manufacturing product line include Tapered Roller Bearings, Cylindrical Roller Bearings, Spherical Roller Bearings and Slewing Bearings with dedicated manufacturing in Jamshedpur and Bharuch.

Your Companys expertise in the domains of metallurgy, tribology and mechanical systems enables collaboration with Original Equipment Manufacturers to design and develop solutions as per application. With about 50+ Industrial and 100+ Automotive channel partners, your Company reaches out to end-markets for its product & services and assists customers in improving the reliability and efficiency of equipment, machinery, and vehicles. Your Company with its visionary leadership, product portfolio and world-class manufacturing facilities, aims to leverage these growing opportunities and deliver value as we surge forward.

Your Company was recipient to CII National Lean Competition and BM Munjal Award for Learning and Development for Business Excellence.

In FY 20-21, your Company grew progressively in the wind energy, industrial and Indian Railway segments. Given the softening of economy and the impact on the global and Indian automotive sector, Company witnessed a de-growth of business to some extent. Your Company believes in being a strategic technology partner with customers and continues to engage in joint development, explore new markets and products while leveraging global acquisitions made by The Timken Company in order to launch these products in the Indian market.


The Company achieved revenue of 14,105.20 million as compared to 16,168.70 million in the previous year, a decline of 13%. The decrease was primarily due to lower volumes caused by lockdown restrictions during first quarter of FY 2020-21.The total expenses reduced by 7% (Cost of Raw materials 9% decrease, employee benefit expenses 4% decrease, other expenses 6% decrease) compared to previous year. Effective tax rate is 27% in FY 2020-21 as compared to 20% in FY 2019-20. Deferred tax gain in previous year on account of change in tax rate was the major contributor for the lower effective tax rate in FY 2019-20. Profit after tax (PAT) stands at 1,431.79 million as compared to 2,460.99 million in the previous year. Decrease in profit is attributed to increase in raw material price, absorption of fixed overheads partially offset with better leverage of variable overheads.

Earnings per share for the year FY 2020-21 was 19.03 as against 32.72 for the previous year . During the year, the company has generated 1,887.08 million cash surplus from its operations as against 3,481.70 million during previous year primarily driven by lower revenue and unfavorable working capital change impact.

Increase in Property plant and equipment net of depreciation 657.76 million compared to previous year primarily driven by the addition of plant & equipment and expansion of buildings. Right of use assets as at March ended 2021 stands at 1,066.05 million as compared to 1,092.16 million in previous year. Capital work in progress has reduced by 590.43 million largely driven by capitalisation of projects which were in progress in the previous year end. Capital work in progress stands at 974.73 million for March ended 2021. These projects follow the project management process and are being monitored by the project management team to ensure timely completion. These projects will be capitalised as and when these assets are ready for its intended use.

One of the properties is classified as Investment property during FY 2020-21 with the carrying value 104.99 as per Ind AS 40 which was earlier part of property plant and equipment.

Inventories for the year ended March 2021 was increased by 772.98 million compared to the previous year in line with the volume increase during last quarter. Inventories are maintained at optimum levels supplemented with continuous improvement ideas.

Trade receivables increased by 798.63 in line with the increased revenue during the last quarter of FY 2020-21. Cash and cash equivalents as at March 31, 2021 was 1,704.04 as compared to 4,146.51 million as at March 31, 2020 primarily reduced on account of dividend payout. The cash balances were managed at appropriate levels as depicted in the statement of cash flow.

Borrowings represent discounted bill of exchange with respect to trade receivables. Increase of 127.29 million compared to previous year was primarily on account of volume increase of bills discounted. Trade payables were 3,354.52 million as at March 31,2021 as compared to 2,156.89 million as at March 31, 2020. The increase was in commensurate with the increased business volume and expenses during the last quarter of the year.

Key Financial Ratios

Parameter For Year Ended March 31, 2021 For Year Ended March 31, 2020 Remarks
Debtors Turnover (times) 4.26 5.45 -
Inventory Turnover (times) 4.10 5.13 -
Interest coverage Ratio (times) 188 140 Reduction in finance cost in current year
Current Ratio (times) 2.16 3.62 Due to reduction in cash balances on account of dividend payout and changes in the working capital
Debt Equity Ratio (%) 2.43% 1.27% Primarily on account of volume increase of bills discounted during last quarter of FY 2020-21 and reduction of equity value on account of distribution of dividend
Operating Profit Margin (%) 14% 19% Due to rise in total expense resulted by increase in raw material price, absorption of fixed overheads during Covid-19 lockdown phase, partially offset with better leverage of variable overheads
Net Profit Margin (%) 10% 15% Due to reduction in operating margin and one time gain in tax expense in previous year due to adoption of new tax regime
Return on Net Worth (%) 11% 16% On account of the reduction of net profit and operating profit as explained above


Strengths Opportunities Threats Outlook
O Strong parentage, broad product offering and diverse application of products. O Leveraging the capabilities of various Acquisitions by Parent Company; providing complete offering in mechanical drive train like belts, industrial chains, couplings, clutches, lubrication systems and housed units. O Unforeseen and sudden currency volatility and raw material prices & availability. O Focus on localization and improvement in indigenous components sourcing in the on-coming years.
O localization of finished goods and indigenously sourced steel requirements. O Any adverse modifications in the industrial environment or government policymaking affecting our customers demand. O Value proposition of all Timken Associated Brands.
O Technologies and R&D capabilities with significant design and process innovation capability. O Risk mitigation by educating customers on importance of using genuine high-quality bearings procured from authorized channel partner.
O Well placed to capitalize on governments focus on Electrification of Indian Railways. O Safety and operational risks posed by low quality counterfeit or spurious products.
O Custom application knowledge and proactive service and engineering engagement with customer to provide energy and cost- effective solutions. O Channel footprint strengthening to penetrate General MRO market and address regional gaps with value added services.
O De-risked revenue stream with cross industry presence.


The Company has a system of internal control commensurate with nature of its business and size and complexity of its operations. The Company has adequately documented policies, procedures and authorization matrix aligned with the level of responsibility which is designed to provide reasonable assurance on recording of transactions, effectiveness, and efficiency of operations, providing reliable financial information and safeguarding of assets. The Company uses SAP ERP and allied IT tools as an integral part of internal control system. Emphasis is placed on automated controls within the process wherever possible to minimise deviations and exceptions. The Company believes in conducting business in a fair and ethical manner. Periodic sessions and e-learning courses are rolled out to make the employees aware of the code of conduct and related policies of the Company. The Company has centralized and standardized some of its transactional processes like invoice processing, collection monitoring, payroll etc. These robust system, policies and procedures set the tone at the top and serves as the foundation for sound internal controls.

The adequacy and effectiveness of Internal controls are continuously examined by independent Internal Auditor appointed by the Company and findings of these audits including its recommended improvements are reported to the Audit Committee of the Board. The adequacy of internal controls is also examined by Statutory Auditors as well and the Company has not received any adverse comments from them on adequacy of the internal control system. The Audit Committee of the Board reviews and determines annual internal audit plan considering the inputs from the Statutory Auditors and the Management. The Audit Committee on a periodic basis reviews significant audit finding, adequacy of internal controls and takes update on implementation of audit recommendations.

The Company has developed and implemented a framework for ensuring internal controls over financial reporting. This framework includes entity-level policies, process controls, IT General Controls and Standard Operating Procedures (SOP). These internal controls are reviewed and tested by Internal Auditors every year. The results are presented to the Audit Committee. Based on the periodical testing, the framework is strengthened, from time to time, to ensure adequacy and effectiveness of Internal Financial Controls. The Company has carried out evaluation of design and effectiveness of these controls and noted no significant material weaknesses or deficiencies which can impact financial reporting.


o Performance Management System

Your Company has a robust Talent Management process, wherein the organization goals are cascaded to teams & individuals thus ensuring that individual goals are aligned to the organization goals. Company believes that performance discussions between managers & associates should happen throughout the year to ensure that any changes in the goal plan owing to role changes in the middle of the year are accommodated.

Company also follows the Continuous Feedback module which helps associates & managers to discuss & document the discussions. The Continuous Performance Management module helps the Company to be focused on the future, to be agile & flexible, to be proactive & engage associates and managers to have ongoing conversations. Performance Management System emphasizes equally on Goals & Competencies.

o Total Rewards

Companys Pay for Performance philosophy is backed up by detailed market studies conducted year on year helping us to assess our positioning. The goal is to design and deliver rewards aligned with business objectives. Alongside, the Company also offers competitive benefits and long term incentive plans to senior management.

o Continued Learning and Trainings

During the year under review, the Company emphasized a lot on e-learning. Almost all training needs of the year were addressed virtually. While virtual learning platform Timken University was always available for associates to take up courses as & when required, the Company also identified the certain trainings and conducted the same by leveraging internal SMEs. Some of skills covered were CRM related trainings for Sales associates, MS Excel, Technical Crash course, Finance for Non-Finance etc. Due to prevalent conditions during FY 2020-21, the Company did virtual onboarding of new employees and conducted orientation programs virtually. 2-week crash course which gives associates an overview of the technical & commercial aspects of our products was conducted virtually with participants from across India & also involving some of our distributor partners.

The Company provides 10-12 weeks in-depth technical training to sales, services & application engineers which covers all technical & commercial aspects along with some soft skills as well. The training also includes a Plant tour which gives exposure to the participants to our manufacturing processes.

Associates were provided opportunities to attend a lot of open training programs conducted by different organizations including webinars hosted by many of our Learning &Development partners. The trainings so imparted received quite good feedback from across the board. The topics of these open programs ranged from managing remote work environment, managing teams remote, enhancing productivity & other leadership related topics.

o Associate Resource Groups

Associate resource groups, or ARGs, are groups that are founded around a common interest or affinity. Purpose of the ARGs is to foster professional development, share best practices and promote multicultural understanding to facilitate business excellence. At present 2 ARGs are active namely Womens International Network (WIN) & Young Professionals Network (YPN).

WINs Mission is to advance the Diversity & Inclusion Strategy of the Company by supporting and informing Company initiatives that attract, promote and engage women, offering personal & professional development opportunities for women and providing a forum and networking community. WIN celebrates the International Womens Day every year along with events which help Women at Timken to achieve their full potential both as associates of Timken & as citizens of their community. During the year under review, WIN conducted few Webinars for associates across India on Eye Care & Important dietary hacks for improving immunity which was the need of the hour during the pandemic. YPN is a group of young business associates which provides various opportunities to associates to network by encouraging participation in their various events organized like Ignite, Impromptu speech competitions etc. Both WIN & YPN collaborate on CSR & few other employee engagement initiatives. Total 1287 employees were employed by the Company as on 31 March, 2021.


Certain statements made in this Report describing industry structure and development, business outlook and opportunities may be “forward looking statement” within the meaning of applicable Securities law and Regulations. Actual results could materially differ from those expressed or implied. Important factors that could make difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statues and incidental factors.

For and on behalf of the Board of Directors
Sanjay Koul
Place: Bengaluru Chairman & Managing Director
Date: 18 June, 2021 DIN: 05159352