MANAGEMENT DISCUSSION & ANALYSIS REPORT The Management of Batliboi Limited brsents the analysis of segment-wise performance of your Company for the year ended 2015-16 and its outlook for the future. This outlook is based on assessment of the current business environment and the expectations, estimates and projections of the Directors and Management of the Company. It may vary due to future economic and political development, both in the Indian and international economies and due to other factors beyond control. A. SEGMENTWISE PERFORMANCE AND OUTLOOK: (I) BatliboiTextile Engineering Group Business Structure The Textile Engineering Group comprises of Textile Machinery and Textile Air Engineering. Textile Air engineering division is a leading manufacturer of complete systems for humidification and waste collection for textile spinning, weaving, knitting plants. Textile Machinery division supplies high quality imported and indigenous machinery from leading global manufacturers to the Spinning, Knitting, Processing and Garmenting Sectors. India's total Textile& Apparel industry size was estimated to be USD 120 Billion in 2015 and is expected to reach 200 Billion mark by 2020 with a CAGR growth rate of approx. 10% on the back of strong Domestic demand & a surge in export orders thanks to stable & muted raw material (yarn) prices as well as shifting of orders from China Developments and Performance Textile Air Engineering Group (TAE) The textile industry in South witnessed a lull period for the year 2015-16. Many mills which were exporting to China market did not get business support last year due to the economic slowdown in China. This made them postpone their proposal of expanding the capacity. Normally southern region contributes about 50% of the business. With the loss in business available in South, performance could not be improved though, West & North region performed to the expected level. However, there was improvement over the brvious year's figures in both booking & billing. Large orders for modification jobs from reputed corporate groups in Northern region fetched reasonable margins. The performance for 2016-17 is expected to be better, considering good enquiry level for spinning and weaving projects and the reasonable level of pending orders. Textile Machinery Division (TMD) This division did well in 2015-16 riding on back of a stellar performance from the Knits segment. With a growth of close to 10% both in terms of Billing, GC as well as bottom line. In the coming fiscal, performance is expected to improve especially with the contribution from new agencies that were finalized earlier. Margins are expected to come under brssure due to severe competition from contemporary suppliers of similar machines. Spinning Machinery:- The overall spinning market remained weak for major part of brvious year & continues to remain so due to severe cutback in imports of yarn by China & also an overall Global slowdown. However increased focus on quality products supported the business. Knitting Machinery:- As mentioned above a strong order book in garment industry and robust growth of the domestic demand in the eastern region kick-started investment in the knitting industry. In other regions gaining of market share primarily among spinners assisted in growth of machine sales. It is expected that the leadership position will be maintained. Processing Machinery:- This is one sector which so far is yet to realize its full potential as it still remain India's weak link in the manufacturing chain. Tightening of norms for pollution control & costs for adhering to such norms is also another hindrance. However, the focus on widening the product offerings including that in Effluent Treatment will generate growth in the coming fiscal and the future years. Opportunities ,Threats and Outlook TAE The near stable price of raw material (cotton) and supportive state Government policies for investment in textile sector is expected to give good results in the current year. Export orders for textile products is expected to be better in this year which will lead to more projects coming up in spinning and weaving sector during 2016-17. However, the reduction in incentives in the Spinning Sector had reduced the level of fresh investments in some States. Competition is expected to be as fierce as ever which would put brssure on margins. TMD Opportunities: • Improved demand for Knitted garments will spur demand for machines. • New rebrsentations in Processing sector will bring in incremental revenue. • Increased focus on quality will mean greater demand for quality machines. Threats: • Discontinuity of TUF subsidy scheme may lead to projects being deferred / shelved. • Financial stability of some of the principals in Europe. • Long delivery for some Machineries. Outlook: Given the potential & the level as well as quality of enquiries that are currently in hand, there is optimism for growth. (II) Batliboi MachineTool Group (BMTG) Business structure The Machine Tool Group is engaged in manufacturing, selling/trading, and servicing of various types of metal forming and metal cutting machine tools. Manufacturing: Batliboi manufactures range of products from General Purpose Conventional type to Computerised Numerical Control (CNC) type as well as Special Purpose machines (SPM). GPM's include Radial drilling machines from 32 mm to 100 mm capacity, portable and moving column radial drill upto 100 mm, milling machines in Size I, II and III. CNC machines include Turning Centres, Vertical Machining Centres, Double Column Machining and Drilling Centres. SPM's: SPM's are built as per the specific needs of the customer for mass production in industries such as automobile manufacturers for milling, boring, facing, drilling and centring applications. Trading: The Company is also engaged as an agency house rebrsenting various overseas reputed companies from Czech Republic, Belgium, Italy, Germany, South Korea, China and Taiwan as well local manufacturers of Metal Cutting and Metal Forming machine tools. Developments and Performance The Machine tool industry has not picked up in 2015-16. Order booking and production figures for CNC machines were lower than last year. Conventional machines and SPMs also showed downward trend. This is due to excessive capacity available in Autosector and complete downfall of Oil & Gas industry. The capital investments in General Engineering, power Tractor was lull in 2015-16. The division performance was reflection of the market. In the last quarter, order booking for CNC machines picked up due to heavy investments for skill development from the educational institute. Opportunities,Threat & Outlook 2016-17 is expected to be turnaround year in Machine Tools. 'The Make in India' effect will start translating into investments in Capital Goods. MachineTool Udhna (MTU) & Special Purpose Machines (SPM), Bengaluru Heavy investment in Railways and in Defence equipments by Private players will give boost to MTU. SPM should do better because of expected revival in Tractor and Auto industry. Measures have been taken in Machine Tool & SPM to meet future challenges. The Products and Production facilities are being rationalised. The manufacturing of SPMs will be shifted to Surat, thus giving cost advantage and more focused approach in Product department. Machine Tool Trading (MTT) Trading division is being restructured to put more focus on the front end sales. This division is expected to do good in Order booking because of heavy investments are lined-up for heavy engineering, Railways and defence. (III) Quickmill Inc. Business Structure Your Company's wholly owned subsidiary is head quartered in Peterborough, Canada and is engaged in manufacture and sale of large size Gantry, Drilling and Milling Machines. Its customers are mainly from Energy, Structural Steel & Job Shop manufacturing sectors. Developments and Performance The performance of Quickmill in 2015-2016 was lower than budget for the year. North America continued with a steady recovery which accounted for the majority of Quickmills business during the year, but the continued slump in the oil and gas sector, large machines sales were slow to recover in all markets. Quickmill is expected to return to profitability in 2016-2017 with some major orders already in hand for the Aerospace, Job Shop and Transportation Industries. North America will continue to be the major market for Quickmill in with other markets like India, Middle East, South Africa & South America playing smaller roles in Quickmills return to profitability. A continued focus & expansion on Quickmills Social Media & Trade Show Marketing strategy will ensure contained costs and a growing brsence with on line users will help with future growth. Quickmill will launch a new product for the Heat Transfer & Structural sectors in the coming year with a low cost entry level drilling machine. With this product being launched this will allow Quickmill to service the smaller end of the combined markets and obtain orders once lost to low cost off shore competitors. Opportunities, Threats & Outlook The company will continue its focus to reduce cost through manufacturing initiatives by importing fabricated products through its offshore supply chains as well as purchase engineering services and design from offshore markets to reduce time & cost in engineering. The Company will continue to focus on full turn key solutions strategy that separates the Company from much of the Competition. The launch of the new low cost entry level drilling machine will help in gaining new markets. The Company is sbrading its wings into new territory. New agents have been appointed internationally, this will help to get new business in 2016-17. (IV) AESA Air Engineering SA Business Structure Your Company's subsidiary AESA is headquartered in France with subsidiaries in China, Singapore and India. It is engaged in the business of Air Conditioning and filtration in textile, tobacco, non woven and glass industries. Developments and Performance The result in 2015-16 is positive. With the brvailing global down-to-earth business mood it was again possible by an extensive and selective sales activity to secure contracts. The brssure on margins remains, especially in India. With the current company structure at the offices situated in France, China, Singapore and India and Rebrsentative Offices in Turkey and Indonesia the company can execute contracts efficiently. Opportunities,Threats and Outlook Markets in Bangladesh, Pakistan and Vietnam are active. Also Indonesia seems to recover. Though break through was made in Uzbekistan, contracts have been delayed due to financing. Orders were reserved in China for glass fiber factories. The trend of Asian companies to invest internationally is growing. R & D activities have been focused on energy and man-power efficient systems, and improvement in product design, cost and quality. With a reasonable order back-log, the year ahead looks promising. B. HUMAN RESOURCES / INDUSTRIAL RELATIONS: The total number of employees in the Company were 382 as on 31st March, 2016. Technical training for manufacturing personnel were conducted at the Company's manufacturing unit at Udhna. Topics including Lean Manufacturing, 7 QC Tools, Metal Cutting Tools, Welding Technology, Kaizen, ISO 9001 awareness, First Aid & Safety awareness, Communication Skills, were covered during the Sessions. Productivity & Process Improvement initiatives continued at manufacturing units. During the year under review industrial relations in the factory were cordial and pro-active and all employees and Union supported productivity and process improvement measures undertaken at all the functions of the Company. The Company has in place Health, Safety and Environment policy for Udhna and Bangalore operations. The same is reviewed by the Board from time to time and appropriate actions are taken as directed. The Company arranged for a Health Camp for all employees at Udhna through Tristar Hospital, Surat. C. INTERNAL CONTROL SYSTEM ANDTHEIR ADEQUACY: Your Company has effective internal control systems commensurate with the size of the Company and the same were operating effectively throughout the year. This is further supplemented by an internal audit being carried out by an external firm of Chartered Accountants. The internal auditors conduct audits of the performance of various departments, functions and locations and also statutory compliances based on an annual audit plan chalked out in consultation with the Audit Committee. They report their observations/ recommendations to the Audit Committee of the Board of Directors, which comprises of three Non-Executive Independent Directors. The Audit Committee reviews the Audit observations and follows up on the implementation of the suggestions and remedial measures and also recommends increased scope of coverage, if necessary. This system of internal control facilitates effective compliance of Section 138 of Companies Act, 2013, the Listing Regulations and also the relevant statutes applicable to the Company. D. CAUTIONARY STATEMENT: Statements in the Management's Discussion and Analysis Report describing the Company's projections or brdictions may be 'forward-looking statements' within the meaning of applicable securities laws and regulations. Actual results may differ materially from those exbrssed or implied. Important factors that could influence the Company's operations include global and domestic demand-supply conditions, raw material prices, and changes in Government regulations, tax laws, economic developments within and outside the country and other factors such as litigation, labour negotiations and other industrial relations. PLACE : Mumbai DATE : 6th May, 2016 |
