DEAR SHAREHOLDERS,
It is with great pleasure that I present to you our Annual Report. This significant
report reflects our commitment to transparency and governance, and our aim to foster a
stronger connection with our esteemed shareholders.
As we navigate the complex and dynamic business landscape, it is imperative that we
foster a culture of transparent and honest communication. Through this report, we aim to
provide you with insights into not only our successes but also the challenges we have
encountered and the strategies we are implementing to overcome them.
What began as a humble business in a small workshop has today evolved into one of the
leading suppliers of springs to the Indian Railways and other sectors. Our story is one of
overcoming challenges, learning and evolving with the changing landscape and I would like
to take you through it.
Our role in the wagon industry, where demand is exceeding the cumulative capacity of
manufacturers, is pivotal. With our products finding their place within these wagons, the
opportunities are abundant.
The rapidly evolving operating environment
Amid a post-Covid global resurgence, the Russia-Ukraine conflict disrupted trade and
raised energy prices. Inflation surged worldwide, prompting central banks to raise rates,
dampening global growth for 2023.
Conversely, India thrived with 7.2% GDP growth. Global commodity price spikes led to
rising inflation (7.79% peak), surpassing RBI's target. RBI responded firmly, raising the
repo rate six times from 4% to 6.5%. With a growing working-age population, a large
domestic market, a boost to infrastructure development and the advent of digitisation,
India is well-positioned to be the fastest-growing large economy in the world.
The burgeoning Indian Railways
The Indian railways, which is our primary customer and a significant contributor to the
Indian economy, registered record revenue figures of H 2.40 lakh crore for FY2023,
reflecting a jump of nearly 25% over the previous year. The Railways also invested heavily
in new infrastructure such as tracks, locomotives and coaches during the year. It also
launched a number of new initiatives such as the Vande Bharat Express and the Gatimaan
Express. The Ministry of Railways invested H 1 lakh crore in augmenting the capacity of
the network. Thus, FY2023 witnessed the highest-ever commissioning of new lines and
doubling/multi-tracking of 5,243 km. Additionally, the higher investments in DFC and
Mumbai-Ahmedabad bullet trains have ensured rapid progress in wagon procurement. In the
Union Budget 2022-23, the railways was allocated H 1.4 trillion. The funds will be spent
on building railway tracks, wagons, trains, electrification, signalling and developing
facilities at stations while focusing on safety.
With favourable government initiatives, the sector is expected to continue playing a
key role in the development of the Indian economy.
Resilient performance
During the year, our profitability encountered challenges due to fixed pricing
contracts and unexpected price increases in key raw materials like iron and steel. Because
these materials are integral to safety components, their procurement is subject to
stringent controls, including both raw material and final product inspections. This
regulatory framework prevents us from stockpiling raw materials in advance, exposing us to
the risk of price escalations after contract agreements are finalised. Unfortunately, this
risk became a reality in FY2023.
Our operational revenue reached H10,735.56 lakh, marking a 28.33% growth from FY2022.
EBITDA reached H1,330.87 lakh, a 0.75% increase compared to FY2023's H1,320.95. EBITDA
margin was 12.40%, down from 15.79% the prior year. Our PAT was H724.05 lakh, down from
H751.44 in FY2022.
Continuing to engineer for rail journeys
Despite the muted performance, our resolve remains strong. From manufacturing Leaf
Springs and Laminated Bearing Springs to providing Air Springs to the railways today, we
have grown with the evolving landscape and we are confident of continuing to make the most
of opportunities that come our way. Furthermore, I am delighted to announce that we are
diversifying our horizons by supplying products to OEMs for Metros. Our interactions with
Siemens and Alstom have been promising, and active discussions are underway to establish
partnerships that align with our values.
Siemens and Alstom's ventures into Metro Coaches, securing contracts from Railways, and
source approvals hold immense promise for us. We are resolutely pursuing these avenues as
they open doors for us to become integral parts of their supply chains.
Our role in the wagon industry, where demand is exceeding the cumulative capacity of
manufacturers, is pivotal. With our products finding their place within these wagons, the
opportunities are abundant. The insights gleaned from leading wagon manufacturers, provide
valuable guidance. Our current market share distribution stands at approximately 20% for
wagons, 40% for passenger coaches and 50% for locomotives. The opportunity ahead is
substantial. While India produced 600 locomotives annually until recently, the coming year
will witness a surge to 1,200 locomotives, followed by an even greater increase to 1,800
locomotives. While these projections are not yet public, they align with government
targets, shaping our strategic direction. This magnitude of opportunity extends beyond
locomotives alone; similar demand trends are evident in the passenger coaches segment,
where volumes are notably higher.
This growth story is propelled by the government's commitment to dedicated freight
corridors spanning North to South and East to West. Such infrastructural development will
bolster train numbers and hasten transportation speeds. As we navigate these trends, our
position remains opportune, promising a future defined by industry leadership and
expansion.
In the forging and coil spring sectors, our focus remains steadfast. The growth
potential in forging applications for the earth-moving and mining industries is
substantial. With a recent investment in a 6-ton hammer, we are aligning ourselves for
future success.
Air Springs hold a prominent place in our growth strategy. They promise higher
profitability and significant revenue potential. At full capacity, this venture has the
potential to generate substantial revenue. Our aim is to achieve optimal capacity
utilization by the second quarter of the next financial year. The paradigm shift toward
Air Springs is evident as they are increasingly adopted in coaches. We anticipate
substantial demand for Air Springs, especially in passenger coaches, where new
installations and maintenance needs are both considerable. We are also positioning
ourselves to fulfill the Indian Government's Make in India' initiative, aiming for
at least 70% indigenisation in our products to secure government contracts. This aligns
well with our ethos of promoting homegrown excellence. Our technological edge, combined
with our focus on a lean balance sheet and working capital efficiency, will be our driving
force.
Progressing with gratitude
As I conclude, I would like to express my heartfelt gratitude to each member of our
team for your unwavering commitment and dedication. It is your tireless efforts that
propel us forward, and your collective skills that drive our success. To our stakeholders,
your trust and support inspire us to reach new heights.
It is important to remember that our journey is not just about milestones, but about
creating sustainable value. With every innovation, every partnership, and every step
forward, we are shaping the future of our Company and the industry at large. I am
confident that with our collective dedication and strategic focus, we are poised to create
a transformative impact with our products in the industries where we operate.
BEST WISHES,
Kundan Lal Bhatia
CHAIRMAN CUM MANAGING DIRECTOR