Yuken India Ltd Management Discussions.

Global economic overview

The global economy grew 2.9% in CY 2019 compared to 3.6% in CY 2018. This sharp decline was precipitated by an increase in global trade disputes that affected the cross-border movement of products and services, a slowdown in the global manufacturing sector, weak growth coming out of some of the largest global economies and the impact of Brexit. The result was that global trade grew a mere 0.9% in CY 2019, pulling down the overall economic growth average. The Great Lockdown, as a result of the pandemic Covid-19, is projected to shrink the global growth significantly starting from the CY 2020. (Source: World Economic Outlook, April 2020, CNN, Economic Times, trading economics, Statista, CNBC)

Indian economic review

India emerged as the fifth-largest world economy in CY 2019 with a gross domestic product (GDP) of USD2.94 trillion. India jumped 14 places to 63 in the 2020 World Banks Ease of Doing Business ranking. There was a decline in consumer spending that affected Indias GDP growth during the year under review. Indias growth for FY2019-20 was 4.2% compared with 6.1% in the previous year. Manufacturing growth was seen at 2%, a 15-year low as against 6.9% growth in FY19.

A sharp slowdown in economic growth and a surge in inflation weighed on the countrys currency rate; the Indian rupee emerged as one of the worst performers among Asian peers, marked by a depreciation of nearly 2% since January 2019. Retail inflation climbed to a six-year high of 7.35% in December 2019. During the last week of the financial year under review, the national lockdown affected freight traffic, consumer offtake and a range of economic activities.

Global growth over the years

World output Advanced economies Developing and emerging
2015 3.5 2.3 4.3
2016 3.4 1.7 4.6
2017 3.9 2.5 4.8
2018 3.6 2.2 4.5
2019 2.9 1.7 3.7

Y-o-Y growth of the Indian economy

FY2016-17 FY2017-18 FY2018-19 FY2019-20
Real GDP growth (%) 8.3 7 6.1 4.2

Growth of the Indian economy, 2019-20

Q1, FY20 Q2, FY20 Q3, FY20 Q4, FY20
Real GDP growth (%) 5.2 4.4 4.1 3.1

Key government initiatives, 2019-20

National infrastructure pipeline: To achieve a GDP of USD 5 trillion by 2025, the government announced a National Infrastructure Policy entailing an investment of 102 trillion in five years.

Corporate tax relief: The government moderated the corporate tax rate to 22% from 25%; it announced a new tax rate of 15% for new domestic manufacturing companies. The new effective CIT would be 25.17%, inclusive of a new lower surcharge of 10% and cess of 4%.


Various forecasts have estimated a sharp de-growth in the Indian economy for the current financial year, the first such instance of de-growth in decades.

Global hydraulic components industry overview

The global hydraulic components market was estimated at USD 61.3 billion in July 2020 and is projected to reach a market value of USD 78.3 billion by 2027, growing at a CAGR of 3.6% between 2020 and 2027. Hydraulic pumps and motors are used for converting mechanical energy into hydraulic or hydrostatic energy. They are integral components of construction, agriculture, oil and gas and material handling machinery. Increase in demand for such equipment resulted in increased demand for hydraulic pumps and motors. The Asia-Pacific region was the largest hydraulic equipment market in 2019, with China, Japan and India being its key markets. The hydraulics market growth was catalyzed by an increased government focus on modern irrigation equipment, industrialization, construction and infrastructure development. (Source: PR Newswire, Technavio)

Indian hydraulic components market overview

The growth of the Indian hydraulic industry is dependent on the off take of mobile hydraulic equipment. Following 2015-16, the Indian hydraulic industry witnessed a demand surge due to the governments extensive on infra structural and agricultural investments. The Indian hydraulic industry is projected to grow at a CAGR of 12-15% between 2018 and 2024. The emergence stringent regulations on carbon emissions and increasing investments in R&D facilities for the development of electric vehicles is expected to drive growth of the Indian hydraulic components industry.

Growth drivers

Rising income: Indias per capita income increased from H126,521 in 2018-19 to H134,226 in 2019-20, increasing disposable incomes.

Infra structural investment: India witnessed a surge in infra structural spending over the past few years. Despite the COVID crisis, total infra structural investment is estimated at around H111

lakh crore between FY2019-20 and FY2023-24.

Rising agricultural investments: The government has focused on the agricultural sector over the foreseeable future with the objective to enhance farm incomes and productivity. The government intends to invest H1.68 lakh crore to augment farm infrastructure between 2020 and 2025 and reduce post-production annual loss of H44,000 crore.

Emergence of electric vehicles: There is an increased adoption of electric vehicles. Under the FAME II scheme, electric vehicles are to be used in state transportation systems, catalyzing the hydraulic market.


• Multi-decade sectoral know-how

• Superior quality products

• Prudent investments in R&D

• Wider product bouquet to address the emerging needs of customers

• Widest distribution and service networks encompassing all major Indian States

• Cost leadership on account of extensive technology absorption and indigenisation

• One of the lowest delivery lead times in the industry


• Weak consumer sentiment

• Stagnant market due to Covid-19 pandemic

• Trade disruption due to the pandemic

• Premium on technology upgradation

• Growing players in the market

• Inflation, rupee depreciation from time to time, high commodity prices and interest rates

Financial analysis (Consolidated)

Gross revenues decreased by 29% to Rs. 246.22 crore during FY – 2019-20 compared to Rs. 345.03 crore during FY -2018-19.

Operating profit (EBITDA) stood at 18.67 crores compared to Rs. 34.45 crore (excluding JDA Income) during FY 2018-19. Finance costs increased to 37.95 % from Rs. 7.88 crore to Rs. 10.88 crore during FY 2019-20 due to increase in term loan availed during the year for the purpose of capital expenditure and short term loan for paying the capital gains tax.

Total expenses stood at Rs. 243.58 crore, including tax expense worth Rs. (2.42) crore.

Profit after tax including other comprehensive income (OCI) stood at Rs. 2.78 crore.

Property, plant and equipment and intangible assets including investment property increased by 9.78% to Rs. 104.64 crore during FY-2019-20 from Rs. 95.32 crore during FY-2018-19.

Capital work-in-progress for the year has increased to Rs. 23.13 crore during FY 2019-20 compared with Rs. 8.92 crore during FY 2018-19 primarily on account of expansion programme.

Cash and cash equivalents stood at Rs. 0.73 crore as on 31st March, 2020 compared to Rs. 1.02 crore as on 31st March, 2019.

Key _nancial ratios

Particulars FY 2019-20 FY 2018-19
EBIDTA/Turnover 8% 10%
Net profit including JDA /Turnover 1% 35%
Net profit excluding JDA /Turnover 1% 5%
Debt-equity ratio 0.24 0.13
Current ratio 1.40 1.44
Interest coverage ratio excluding JDA income 1.02 3.58
Interest coverage ratio including JDA income 1.02 20.12
Inventory Turnover (no of days) - excluding residential units from JDA. 81 52
Debtors Turnover(no of days) 100 87
Return on Net worth including JDA (%) 2% 69%
Return on Net worth excluding JDA (%) 4% 25%
Book value per share (Rs.) 144.80 144.81
Earnings per share including JDA (Rs.) 2.52 99.50
Earnings per share excluding JDA (Rs.) 2.52 14.93

In Yuken India, transparency and accountability has always been a part of its organisational culture. The Companys corporate governance has been strengthened by its code of conduct and various policies framed in compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Company has in place the Prevention of

Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has formed a robust Audit Committee that monitors and controls regular internal processes. The Committee of the Board and the Constitution of the Company assures that the internal procedures and accounting policies are in confirmity with the requirements of Section 177 of the Companies Act, 2013 and also with that of the requirements of Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Human resources

The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve with ongoing technological advancements.

During the year, the Company organized training programmes in different areas such as technical skills, behavioural skills, business excellence, general management, advanced management, leadership skills, customer orientation, safety, values and code of conduct. The Companys employee strength stood at 464 excluding trainees and casuals as on 31st March, 2020.

Cautionary statement

The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.