Vishal Bearings Ltd Management Discussions

Pursuant to Regulation 34(3) and Para B of Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the amendments thereof, details of the Management discussion and analysis are given below:

INTRODUCTION

The Vishal Company designs and manufactures a growing portfolio of engineered bearings products, and related services. With more than a century of knowledge and innovation, the Company continuously improves the reliability and efficiency of global machinery and equipment to move the world forward.

Vishals Engineered Bearings segment features a broad range of product designs serving original equipment manufacturers (OEMs) and end-users worldwide. Vishal is an authority on tapered roller bearings and leverages its position by applying engineering know-how and technology across its entire bearing portfolio, which includes tapered, spherical and cylindrical roller bearings; plain bearings, metal-polymer bearings and rod end bearings; thrust and specialty ball bearings; and housed or mounted bearings.

Vishal creates value by understanding customer needs and applying its know-how to serve a broad range of customers in attractive markets and industries across the globe. The Companys business strengths include its product technology, end-market diversity, geographic reach and after-market mix. Vishal collaborates with OEMs to improve equipment efficiency with its engineered products and captures subsequent equipment replacement cycles by selling largely through independent channels in the aftermarket.

GLOBAL ECONOMY

The global roller bearings market size was valued at USD 21.05 billion in 2018 and is projected to reach USD 32.45 billion by the end of 2032, exhibiting a CAGR of 2.9% during the forecast period. Asia Pacific dominated the roller bearings market with a market share of 35.15% in 2018.

The growing usage of heavy machinery and equipment mainly in manufacturing facilities and automotive industry is supplementing the market trend. Adoption of high-performance industrial machinery and demand of customized machines for conducting complex operations and task specificity is driving the market growth. Generally, roller bearings are featured with antifriction components that reduce friction, high resistance, which leads to increase mobility, increase higher load capacity, and life span of machines. Furthermore, machine tools that are used across construction, mining, and agricultural sectors require high precision roller bearings to sustain heavy loads and reduce energy consumption.

Therefore, the demand for large diameter roller bearings is projected to increase across these sectors. Similarly, the rise in investment projects in mining, infrastructure development, and the increasing number of offshore wind farms is closely linked to the growth of roller bearings market. The key manufacturing players are investing in their research and development activities and launching new advanced solutions to their existing product line to strengthen their market reach and maintain their position in the competitive market.

(Source:https://www.fortunebusinessinsights.com/industry-reports/roller-bearings-market-101249)

INDIAN ECONOMY

Indias GDP took a big leap on Leap Day in 2024: The countrys remarkable growth rate of

8.4% in the third quarter of the fiscal year 20241 surpassed all expectations, as market analysts had penciled in a slower growth this quarter, between 6.6% and 7.2%. Deloittes projected growth for the quarter was between 7.1% and 7.4% (as published in January 2024). With substantial revisions to the data from the past three quarters of the fiscal year,

Indias GDP growth already touched 8.2% year over year (YoY) in these quarters.

We have revised our growth prediction for this year to a range of 7.6% to 7.8%, up from our previous estimates due to GDP revisions and stronger-than-expected growth in fiscal 2024. However, we expect growth in the fourth quarter to be modest because of uncertainties related to Indias 2024 general elections and modest consumption growth. Our expectations for the near-term future remain in line with previous forecasts with a slight change in the forecast range due to a higher base effect in fiscal 2024. We believe GDP growth to be around 6.6% in the next fiscal year (fiscal 2025) and 6.75% in the year after (fiscal 2026), as markets learn to factor in geopolitical uncertainties in their investment and consumption decisions.

The global economy is expected to witness a synchronous rebound in 2025 as major election uncertainties are out of the way and central banks in the West likely announce a couple of rate cuts later in 2024. India will likely see improved capital flows boosting private investment and a rebound in exports. Inflation concerns remain, however, which we believe may ease only in the latter half of the next fiscal year barring any surprises from rising oil or food prices.

In this edition of India economic outlook, the focus is on the emerging consumer spending patterns in India, highlighting the rise of the middle-income class. Not only has growth in consumer spending post pandemic been fluctuating, but there is also a shift in consumption patterns, with demand for luxury and high-end products and services growing faster than demand for basic goods. As we expect the number of middle- to high-income households with increasing disposable income to rise, this trend will likely get further amplified, driving overall private consumer expenditure growth.

But the challenge of rising household debt and falling savings could weigh on long-term growth sustainability. Controlling household debt to prevent it from crossing unsustainable levels will be essential to mitigate risks of debt overhang, maintain economic stability, and protect households against financial vulnerability.

(Source:https://www.deloitte.com/us/en/insights/economy/asia-pacific/india-economic-outlook.html)

ROLLER BEARING INDUSTRY

Roller Bearings are a type of rolling-element bearing that uses cylinders (rollers) to maintain the separation between the moving parts of the bearing (as opposed to using balls as the rolling element). The purpose of a roller bearing is to reduce rotational friction and support radial and axial loads. Compared to ball bearings, roller bearings can support heavy radial loads and limited axial loads (parallel to the shaft).

Global core Roller Bearing manufacturers include SKF, Schaeffler etc. The top 5 companies hold a share of about 60%. Europe is the largest market, with a share about 24%, followed by China and North America with the share about 23% and 19%.

The global Roller Bearing market is valued at US$ 19220 million in 2020. The market size will reach US$ 29630 million by the end of 2027, growing at a CAGR of 5.4% during 2021-2027.

Bearings are antifriction components that help improve the mobility of components. Different types of bearings are manufactured depending on the task specificity, such as roller bearing, sensor bearings, plain bearings, ball bearings, and others. Roller bearings are equipped with cylindrical rollers with high radial load capacity. The increase in demand for roller bearings is directly related to the growth in production of high-performance industrial machinery.

Increase in usage of heavy machinery in the construction industry and high demand for application specific bearings drive the market. Rise in investment projects in mining, infrastructure development, and transport infrastructure development fuel the growth of the market. Moreover, increase in number of offshore wind farms results in greater adoption of roller bearings. However, roller bearings incur high installation costs and complex maintenance operations are few factors that are expected to hamper the growth of the market.

The global roller bearings market is segmented on the basis of product type, end-user industry, and geography. On the basis of product type, the market is classified into tapered, needle, spherical, cylindrical, and thrust. Based on the end-user industry, the market is divided into electrical, automotive, agriculture, construction, energy & power, and others (general engineering, aerospace). By geography, the market is analysed North America, Asia-Pacific, Europe, and LAMEA.

The key players operating in the global roller bearings industry are NTN Corp., SKF AB, Brammer, NBI Bearings, RCB Bearing, Timken, Schaeffler AG, NSK Ltd., C&U Group, and JTEKT Corporation.

ENGINEERED BEARINGS

The Vishal Bearing portfolio features a broad range of engineered bearing products, including tapered, spherical and cylindrical roller bearings; pain bearings and rod end bearings; thrust and specialty ball bearings; and housed bearings.

A bearing is a mechanical device that reduces friction between moving parts. The purpose of a bearing is to carry a load while allowing a machine shaft to rotate freely. The basic elements of the bearing generally include two rings, called races; a set of rolling elements that rotate around the bearing raceway; and a cage to separate and guide the rolling elements. Bearings come in a number of designs, featuring tapered, spherical, cylindrical or ball rolling elements. The various bearing designs accommodate radial and/or thrust loads differently, making certain bearing types better suited for specific applications.

Selection and development of bearings for customer applications and demand for high reliability require sophisticated engineering and analytical techniques. High precision tolerance, proprietary internal geometries and quality materials provide Vishal bearings with high load-carrying capacity, excellent friction-reducing qualities and long service lives. The uses for bearings are diverse and can be found in transportation applications that include premium passenger cars and trucks, heavy trucks, helicopters, airplanes and trains.

MARKET SEGMENTATION

Manufacturing companies are emphasizing reducing the weight of the bearings in order to lessen vehicle emission and improve the efficiency of the vehicles. This significant move in the bearings industry is fueling the global roller bearings market share. The automobile industry is focusing on manufacturing light weight bearings, especially in modern cars and SUVs. Moreover, light weight bearings consist of high durability and stiffness. Integration of such bearings have widely been adopted in electric vehicles as high durability will lower the load on the engine and increase the life span of the vehicles further enlarging the market size.

Within product type, the cylindrical roller bearings held the highest market share in 2018, due to an increase in demand for heavy machinery where high speed and loads are involved. Moreover, the cylindrical bearings are designed in order to lower stress generated during operations. These bearings are widely adopted in end use verticals mainly automotive and aerospace industry as the spare and consumables are attached to the important point of contact.

Tapered roller bearings are anticipated to drive the market in the forecast period as they are specifically designed to handle radial and axial forces simultaneously. The major application of tapered bearings is integrated into medical equipment, defense equipment, etc. The adoption of spherical roller bearings is anticipated to be moderate in the forecast period owing to its ability to withstand shock loads, reliability, ease in mounting and erecting. Moreover, the application of spherical roller bearings is growing in the international market and exploring its reach to almost every industry vertical mainly automotive and aerospace sector.

(Source:https://www.fortunebusinessinsights.com/industry-reports/roller-bearings-market-101249)

INDUSTRY STRUCTURE AND DEVELOPMENT

The Company is in the Business of Ball and Roller Bearings which has applications in Automobiles, pumps, gear boxes, heavy earth moving equipments and industrial sectors. Predominantly the Company deals in Bearings required by the Automobile Industry and gear boxes. The growth of the Bearing Industry is primarily dependent on the growth of OEM and After-Sales Markets and can be more closely related with the Automotive and Industrial Sectors.

Most of the demand for bearings in the Indian Market comes from the automobiles sector, whereas the requirement for Industrial Bearings is well spread out over different varieties of bearings. There is a wide range of different kinds of bearings and in different sizes with specific purposes depending on the end application of bearings. Whereas there are many Indian players in the production of different types of bearings, most of them are producing automobile bearings, while some are producing bearings which find use in the Industrial sector.

Roller bearings have wide ranging applications and are critical to industrial progress. With the worlds industrial nations planning to move their supply chain away from China, and

India likely to be one of the beneficiaries of such a move, it would continue to remain a fast-growing major economy in the world and is expected to be one of the top three global economic powers over the next decade. Market growth in the Indian mobility industry for both people and goods have a very large potential given the geographical spread and size of population- an aspirational young population spurs personal mobility while the need to establish strong supply chains between producers and markets drives growth for goods mobility. Also new vehicle models are being constantly introduced; there is expansion of the public transport systems, dedicated freight corridors for movement of farm produce.

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 contact are the focus areas to reassure them that quality products delivered in a timely and cost-efficient manner will be our priority.

FUTURE OUTLOOK

FY 2024 is likely to be a better year with several economic indicators such as power demand, infra development, rail freight, e-way bills, GST collection, steel consumption, among others trending positively and could lead to economic recovery. Favorable Government policies to support the Indian manufacturing industry and the emphasis on spending for building infrastructure for roads and mass rail transportation, vehicle scrappage policy and forecasts of a normal monsoon which will aid rural income are all expected to aid demand for new vehicles. Continuous innovations and new launches, by way of hybrid fuel efficient vehicles will further propel demand and allow the industry time to adjust their production facilities to meet the new requirements for the introduction of Electric vehicles.

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 motorcycles 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 unscrupulous suppliers.

b) With global demand weakening resulting in idle/ low utilization of installed capacities, the industry must 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 environmentally 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.

RISK FACTORS

The global bearing industry is highly competitive and consolidated. We compete with many domestic and foreign manufacturers of anti-friction bearings. Due to our competitiveness within these industries, we may not be able to continue to increase prices for our products to cover increases in our costs or to achieve the desired profitability. In addition, we face pressure from our customers to reduce prices, and the contractual nature of business with OEM customers could adversely affect our revenues and profitability. In addition, our customers may choose to purchase products from one of our competitors rather than pay the prices we seek for our products, which could adversely affect our revenues and profitability.

Our business operations are capital intensive, and we devote a significant amount of capital to certain industries. Our profitability is dependent on factors such as labor compensation and productivity and inventory and supply chain management, which are subject to risks that we may not be able to control. If there are downturns in the industries that we serve, including as a result of high inflation or a recession, we may be forced to significantly curtail or suspend our operations with respect to those industries, including laying-off employees, reducing production, recording asset impairment charges and other measures, which may adversely affect our results of operations and profitability.

The Company has previously experienced distributor inventory corrections reflecting de-stocking of the supply chain associated with softer demand in certain markets. The Companys results in the period may be adversely impacted by similar customer inventory adjustments in the future, as well as changes in customer buying preferences.

The changes in raw material prices, the availability or cost of raw materials or logistics expenses could adversely affect our results of operations and profit margins.

COMPETITION

The bearing industries are highly competitive. Vishal primarily competes based on its total value proposition, including product design and performance, application engineering, quality, price, timeliness of delivery, and the ability to provide technical sales and service support on a global basis. The Company competes with many domestic and foreign manufacturers of bearings.

SALES AND DISTRIBUTION

Vishal products are sold principally by its internal sales organizations. A portion of each segments sales are made through authorized distributors or sales agents.

Customer collaboration is central to the Companys sales strategy. Therefore, Vishal goes where its customers need us, with sales engineers primarily working in close proximity to customers rather than at production sites. The Companys sales force continuously updates the teams training and knowledge regarding engineered bearings, and they assist customers during product development and implementation phases and provide ongoing service and support.

HUMAN CAPITAL

The Company believes that its employees and their collective knowledge and experience are among its most valuable resources. The Company is committed to providing a safe work environment and growth opportunities for its employees to learn and advance their career with the Company to promote and safeguard these key resources.

The Company also believes that having open, honest dialogue with its employees is key to maintaining its strong culture and ethical work practices. In line with that approach, the Company conducts comprehensive surveys on a periodic basis and individual stay interviews to measure employee engagement. Exit interviews are conducted with employees who voluntarily terminated their employment, which helps improve management processes. The Company deploys pulse surveys to gain insights from employees recent experiences and to better understand how effectively it is engaging, energizing and enabling its workforce.

The Company provides several professional development and training opportunities to advance its employees skills and expertise. Some of these opportunities include online-learning platforms, job-specific training, employee development programs, including its operations development program. Comprehensive leadership, skill and competency assessments are offered to Company employees to best identify and address individual and team development needs and activities. To better inform its hiring and employee development efforts, the Company has also partnered with third-party vendors to provide required training for its managers focused on leadership, diversity and inclusion.

Employee Health and Safety

Employee health and safety remains a top priority for the Company and its commitment to safety starts at the top of the organization.

Employment

On March 31, 2024, Vishal Bearings Ltd had 126 employees and 290 employees on a contract basis.

COMPLIANCE WITH GOVERNMENTAL REGULATIONS

The Company continues its efforts to protect the environment and comply with environmental protection laws. Additionally, it has invested in pollution control equipment and updated plant operational practices. The Companys manufacturing plants are expected to have an effective environmental management system which follows the ISO 9001, ISO/TS 16949, ISO 14001, OHSAS 18001 Certified Organization.

Management believes any ultimate liability with respect to pending actions will not materially affect the Companys annual results of operations, cash flows or financial position. The Company also is conducting environmental investigation and/or remediation activities at certain current or former operating sites. The costs of such investigation and remediation activities, in the aggregate, are not expected to be material to the operations or financial position of the Company.

New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements may require Timken to incur costs, change production methods or materials, or become the basis for new or increased liabilities that could have a materially adverse effect on the Companys business, financial condition or results of operations.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company, through its management, is responsible for establishing and maintaining adequate internal control over financial reporting commensurate with its size and nature of business. Our internal control systems are effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with the generally accepted principles of accounting. The internal control systems provide for well-defined policies, guidelines, authorizations and approval procedures.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objective, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicable laws and regulations. Certain observations made on the industry and other players also reflect the opinion by the management and the management accepts no liability on such opinions. Actual results might differ materially from those either expressed or implied.

	For and on behalf of the Board of Directors
	VISHAL BEARINGS LIMITED
Date: 15.07.2024
Place: Shapar, Rajkot
	Sd/-
	DILIP G. CHANGELA
	Chairman & MD
	DIN: 00247302