Enduring tough times
The year gone by was a challenging one, to say the least, more so for industries and
companies like us. But before getting into the details of our performance, let me give you
a context of our operating environment for the year. The year began with the fear of the
distressing second wave of COVID-19, which posed several challenges for us. As a result of
the panic caused due to the second wave of Covid, our SME customer segment postponed and
deferred their CAPEX plans, and while situations did get better with the markets opening
up and the economy moving towards a revival, we faced some lingering effects in terms of
pandemic induced panic all the way up till Q3FY22. During the same time, some of the large
corporate customers also pushed their automation projects down the line as many of them
couldn't visit our facilities in time and give us the final confirmation on the delivery
of these projects.
On the institutional front, we witnessed good traction in specific projects and product
categories, such as Automated Machining Cells for Alloy
Wheels, wherein we also executed a milestone project for 4W Alloy Wheels for one of
India's premier wheel manufacturers. However, due to the travel restrictions in the
earlier quarters of the year, coupled with some spill over of order execution, our
progress in this segment was not fully captured in FY22's performance. These factors and
concerns in our business segments led us to report a decline of 10% in Revenue from
Operations, which stood at Rs 60.33 Crore in FY22 compared to Rs 67.14 Crore in FY21.
Resultantly, this also impacted our profitability.
Another major issue we faced this year was the rising input costs, which was a cause
for concern across all manufacturing industries worldwide, and included raw materials such
as sheet metals, electrical components, and CNC control panels, among others. As a result,
our EBITDA margin in FY22 stood at 11.4% compared to 14.0% in FY21.
A lower EBITDA combined with higher interest & depreciation led to a Net Loss of Rs
3.14 crores in FY22, against a PAT of Rs 0.36 crores in FY21.
At Marshall, we understand the severity of our performance dip, despite it being partly
attributable to a challenging external macro environment. To that extent, we have taken
certain immediate strategic initiatives to bounce back from our FY22 performance, which
includes focusing on high-performing product categories with better profit margins rather
than volumes. We also reorganised our manufacturing facilities in Q1FY23:
#1: Manufacturing in Unit 1 & 2 has been re-organized to minimize movement of
material and men from start to finish of each machine.
While Unit 1 will carry out machining, sub-assembly & painting, Unit 2 will focus
on assembly testing & dispatch.
#2: Centralization of all machining activity in 2 halls in unit 1 will enable more
efficient manufacturing & enable increase in working hours of these machines as and
when required.
#3: Adopting lean manufacturing to reduce the time from start to finish for all
machines.
In addition, we are also careful about booking our new businesses keeping in mind that
higher input costs are effectively passed on to the customers. In the medium to long run,
we want to focus on scaling up niche, automated and Industry 4.0 offerings to revert to
our pre-Covid profitability levels.
While the recent past has been challenging for us at Marshall, we are every bit
confident that we will be able to leverage our capabilities to deliver growth in the
coming years.
Solutions that are increasingly crucial for the manufacturing industry
Unsurprisingly, the pandemic hurled two very challenging years for Marshall, which
immediately reflected in our top line and bottom line performance. Still, it also
presented a silver lining in terms of our customers becoming more cognizant of using
technology. Until the pandemic, Indian machine shops demonstrated an over-reliance on
labour-intensive manual processes. Thus, in the last two years, the Indian machine shops
faced severe issues with the availability of skilled operators. Further, what motivated
the Indian machine shops to look at meaningful automation was the need to optimise costs
and improve efficiencies in a dynamic and challenging environment. Therefore, in today's
manufacturing industry, there is an increase in demand for product solutions that address
automation, Industry 4.0, and smart IoT-based factories that can be monitored remotely.
These ideas that were in the early stages of development a decade ago have now become
essential to the modern world. This context sets the stage for Marshall's carefully
designed three-pronged product philosophy i.e., Marshall Technology
Trishool, which focuses on delivering - Super-Optimized Machines, Industry 4.0
offerings such as accessible, affordable, and implementable Industry 4.0 technologies, and
Affordable Automation wherein automation is split over more than one machine, thereby
generating a higher ROI and shorter payback for the manufacturer.
Marshall is geared to serve these emerging needs and, in many cases, is the only
indigenous option in categories dominated by expensive imported CNC machines. Being the
sole indigenous solution provider in many categories, we stand to gain significantly from
these positive trends in the industry.
Outlook for the years to come
As we prepare for the next leg of our journey, we are excited about a couple of
categories that will drive our growth aspirations. These include emerging manufacturing
sectors such as aerospace & defence, medical equipment, and electronics, wherein we
don't have any presence as of yet. Now defence as a category is a tricky one since it is
predominantly a tender-driven business. All this while we intentionally steered away from
it, but with our current product offerings we feel that we can potentially unlock some
opportunities in this space, and therefore are actively pursuing some of the categories in
defence where our products stand to gain from limited competition.
Another key aspect that we are focusing on now is our geographic presence, and two key
markets outside India that we want to tap into are the United States & Europe. In this
regard, we have successfully tied-up with certain dealers and distributors in the US, who
will help us identify certain niche spots for us to cater to. Furthermore, we are in
discussion with a major European Machine Manufacturer for a mutually beneficial
relationship.
Now, as many of you may be aware, we have also concluded a significant capacity
expansion in 2021. This "At Marshall, we understand the severity of our performance
dip, despite it being partly attributable to a challenging external macro environment. To
that extent, we have taken certain immediate strategic initiatives to bounce back from our
FY22 performance, which includes focusing on high-performing product categories with
better profit margins rather than volumes." upfront investment and expansion was
aimed at catering to our growth aspirations for the coming few years. With this, our
present manufacturing units enable us to achieve revenues to the tune of Rs 250 crores and
EBITDA margins of up to 25%. Marshall is preparing to deliver on this revenue goal and is
certain that its concerted efforts will fructify into gains in the times ahead.
Before concluding my letter, I would like to thank all my board members, regulatory
authorities, senior management, employees, bankers and shareholders for their continuous
guidance and unwavering support. Marshall is ready to take its next leap and ride the wave
of technology advancement, and your trust in us makes us all the more confident about our
abilities to do so. Thank you.
| Yours Sincerely, |
| Gaurav Sarup |
| Managing Director |