ALICON CASTALLOY LIMITED
ANNUAL REPORT 2011-2012
YOUR DIRECTORS HAVE PLEASURE IN PRESENTING THEIR TWENTY SECOND ANNUAL
REPORT TOGETHER WITH THE AUDITED STATEMENTS OF ACCOUNTS FOR THE YEAR ENDED
31ST MARCH, 2012.
(Rs. in Millions)
PARTICULARS Standalone Standalone Consolidated
Year Ended Year Ended Year Ended
March 31, 2012 March 31, 2011 March 31, 2012
Gross Sales 4216.33 2886.74 5095.28
Net Sales 3808.24 2566.70 4687.19
Interest & Tax 552.34 398.84 502.60
Less: Depreciation &
Prior Period adjustments 149.74 126.17 170.76
Less: Interest 123.00 86.73 128.91
Profit before Tax 279.60 185.94 202.93
Provision for Tax 59.51 39.64 58.77
Profit after Tax 220.09 146.30 144.16
brought forward 332.02 213.55 340.38
Net Profit Available
for appropriation 552.11 359.85 484.54
Enthused with the commendable results, your Directors have recommended a
higher dividend of 27.5% (Re1.38 per share of Rs.5/- each) as against 20%
for the previous year. In the hands of shareholders the dividend will be
free of tax. The total payout on account of Dividend and tax thereon for
the year will be Rs. 17.64 million.
EVEN IN ODD ECONOMIC SITUATION, YOUR COMPANY TURNED OUT ONE MORE YEAR OF
RECORD ACHIEVEMENTS. ON A STANDALONE BASIS, THE COMPANY RECORDED A NET SALE
OF RS.3,808.24 MILLION AS AGAINST RS.2,566.70 IN THE PREVIOUS YEAR, A JUMP
OF 48%. THE TOTAL INCOME FOR THE YEAR WAS RS.3,818.84 MILLION AS AGAINST
RS.2,584.68 MILLION A YEAR AGO. INSPITE OF HIGHER PROVISION FOR
DEPRECIATION AND FINANCIAL COST, THE PRE-TAX PROFIT GREW BY 48%. PRE-TAX
PROFIT WAS RS.279.60 MILLION AS AGAINST RS.185.94 MILLION IN THE LAST YEAR.
On consolidated basis (inclusive of working of the overseas subsidiaries),
the net sales for the year was Rs. 4,687.19 million and pre-tax profit was
Rs.202.93 million. In the previous year, consolidated net sales was
Rs.3,191.20 million and pre-tax profit was Rs. 197.75 million.
During the year, the Company spent Rs. 324.45 million for expansion of its
plant and machinery on stand alone and Rs. 374.76 million on consolidation
basis. The entire expansion was funded from the internal accruals and term
The Company is continuously developing new products for other engineering
and infra related industries. This will enable the Company to sustain the
growth in years to come. A detailed review of the future outlook is given
under the head Management Discussion and Analysis Report, which forms part
of this report.
To consolidate the European business, the operations in Austria are being
shifted to Slovakia. Though presently, the overseas operations are
incurring loss, after completing the consolidation exercise, the same is
expected to become profitable.
A statement pursuant to Section 212 of the Companies Act, 1956 relating to
subsidiary companies is attached to the accounts.
Consolidated Financial Statement pursuant to Clause 41 of the Listing
Agreement with the Stock Exchanges and prepared in accordance with the
Accounting Standards prescribed by the Institute of Chartered Accountants,
In terms of the general exemption granted by the Ministry of Corporate
Affairs vide circular No. 02/2011 dated 8th February, 2011 for not
attaching the annual accounts of subsidiaries and in compliance with the
conditions enlisted therein, the report and annual accounts of the
subsidiary companies for the financial year ended 31st March, 2012 have not
been attached to the Company`s Accounts.
The annual accounts of the subsidiary companies and the related information
are kept open for inspection by any shareholders at the Registered Office
of the Company and of the concerned Subsidiary Company. Any shareholder,
who wishes to obtain a copy of the said documents of any of the subsidiary
companies, may send a request in writing at the Registered Office of the
Your Company is committed to adhere to Corporate Governance guidelines set
out by SEBI and has complied with all the mandatory provisions of Clause 49
of the Listing Agreement. A separate section on Corporate Governance
together with Certificate from the Company`s Auditors confirming compliance
is set out in the Annexure forming part of this report.
MANAGEMENT DISCUSSION & ANALYSIS:
A detailed review of the industrial growth vis-a-vis the growth of the
Company and the future outlook is given under the head Management
Discussion and Analysis Report, which forms part of this report.
DIRECTORS` RESPONSIBILITY STATEMENT:
To the best of their knowledge and belief and according to information and
explanations provided to them, your Directors make the following statement,
pursuant to Section 217(2AA) of the Companies Act, 1956 that:
In the preparation of annual accounts, the applicable accounting standards
have been followed and that no material departure have been made from the
Appropriate accounting policies have been selected and applied consistently
and judgments and estimates that are reasonable and prudent so as to give a
true and fair view of the state of affairs of the Company at the end of
financial year March 31, 2012 and of the profit of the Company for the year
ended on that date;
Proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act,
1956 for safeguarding the assets of the Company and for preventing,
detecting fraud and other irregularities;
The annual accounts have been prepared on a `going concern` basis.
On 30th May, 2012 Mr. Maskatsu Uchiyama was appointed as an Alternate
Director to Mr. Junichi Suzuki. Consequent upon his appointment, Mr. Osamu
Ohashi ceased to be the Alternate Director.
To comply with the requirement of the Companies Act, 1956 Mr. A.D.
Harolikar and Mr. Vinay Panjabi, Directors, shall retire by rotation and
being eligible, they offer themselves for reappointment. Details of
Directors seeking re-appointment are included in the Corporate Governance
Information as required in pursuance of Section 217(2A) of the Companies
Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975,
is annexed and forms part of this report.
CONSERVATION OF ENERGY, ETC.:
Information pertaining to conservation of energy, technology absorption and
foreign exchange earnings and outgo pursuant to Section 217(1(e) of the
Companies Act, 1956 is set out in the Annexure forming part of this report.
The observations made in the Auditors` Report and details provided in Notes
to the Accounts are self-explanatory and therefore, do not call for any
further comments under the Companies Act, 1956.
Asit Mehta & Associates, Statutory Auditors of the Company shall retire at
the forthcoming Annual General Meeting and are eligible for reappointment.
Members are requested to appoint Auditors for the current financial year
and fix their remuneration.
YOUR DIRECTORS WISH TO THANK ENKEI CORPORATION, JAPAN, OUR TECHNICAL
COLLABORATOR, FOR THEIR VALUED SUPPORT AND GUIDANCE FOR DEVELOPMENT OF NEW
PARTS. YOUR DIRECTORS ALSO WISH TO PLACE ON RECORD THEIR DEEP SENSE OF
APPRECIATION FOR THE COMMITTED SERVICES BY EMPLOYEES AT ALL LEVELS. YOUR
DIRECTORS TAKE THIS OPPORTUNITY TO EXPRESS THEIR GRATITUDE FOR UNSTINTED
SUPPORT EXTENDED BY CUSTOMERS, SUPPLIERS, BANKERS AND OTHER BUSINESS
ASSOCIATES, AND AT LAST BUT NOT LEAST THE SHAREHOLDERS FOR THE CONFIDENCE
REPOSED IN THE MANAGEMENT.
On behalf of the Board of Directors
(S. Rai) (A.D. Harolikar)
Managing Director Director
Place: Shikrapur, Pune
Date : July 30, 2012.
ANNEXURE TO DIRECTOR`S REPORT
PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE
REPORT OF THE BOARD OF DIRECTORS) RULES, 1988.
A. CONSERVATION OF ENERGY:
During the year ISO 14001 surveillance Audit was carried out by M/s TUV
Reinland and auditors recommended continuation of the ISO 14001 for the
The various steps taken for energy conservation during the year were:
* Installation of capacitor banks to improve power factor
* Installation of automatic voltage regulators
* Energy efficient compressor system
* Utilization of natural light for factory lighting during day time
Details of energy consumption: FORM `A` (Amount in Rupees)
A. POWER AND FUEL CONSUMPTION:
1. ELECTRICITY FOR THE FOR THE
YEAR ENDED YEAR ENDED
a. Purchased Quantity Units 25,814,066 20,092,628
Total Amount Rs. 155,955,886 106,855,620
Average Rate Per Unit Rs. 6.04 5.32
b. Generated Quantity Units 2,929,524 3,124,042
Total Amount Rs. 35,156,961 40,466,471
Average Rate Per Unit Rs. 12.00 12.95
2. LDO/FURNACE OIL
Quantity Litre 2,514,574 3,451,344
Total Amount Rs. 100,531,792 92,863,572
Average Rate Per Unit Rs. 39.98 26.91
B. CONSUMPTION PER
UNIT OF PRODUCTION
1. Electricity Units 3.21 3.73
2. LDO/Furnace Oil Litre 0.28 0.56
The Company is producing a variety of castings and the consumption of
electricity and fuel for the same is not uniform. Hence, allocation of
energy per unit of production may not be relevant.
B. TECHNOLOGY ABSORPTION:
FORM `B`, Form for disclosure of particulars with respect to:-
RESEARCH AND DEVELOPMENT:
Expenditure on R&D for the year ended 31st March, 2012
(Rupees In Lacs)
PARTICULAR 2011-2012 2011-2010
A. Capital Expenditure 157.76 203.88
B. Recurring Expenditure 450.89 498.27
TOTAL 608.65 702.15
Total R&D expenditure as a
percentage of total income 1.59% 2.72%
Technology absorption, adoption and innovation:
The Company has successfully absorbed technology obtained from the foreign
collaborators for aluminium die castings.
RESEARCH & DEVELOPMENT:
India is emerging as one of the fastest growing consumer market. Almost
every global OEM has set up a strong base in India for global manufacturing
of their products. This has created numerous opportunities in the
manufacturing domain. The casting industry has benefited by the entry of
these international players who wish to be globally cost competent. Hence
Research & Development in all areas of casting in order to innovate new
products, increase quality and reduce overall cost and weight has become a
priority. These R&D activities keep an organization abreast with the latest
in Technology and help to gain an edge over competitors.
In the previous fiscal year, the Company`s in-house R&D Unit was recognized
by the Department of Scientific and Industrial Research, Ministry of
Science & Technology, Government of India. This achievement has boosted the
Group`s R&D morale and has increased the confidence of the customers in the
CASTING DEVELOPMENT - GDC & LPDC:
The Company is constantly aiming to bring about innovative solutions in the
casting routes (GDC & LPDC) to yield higher output. A dedicated team
monitors the output levels against the planned (scheduled) levels and
prepares a concise solution to bridge the gap between the two.
Innovations in the LPDC route include the Pie System. This LPDC system is a
completely enclosed system with a pressurized furnace. In order to have
negligible moisture contamination, the system is isolated from the
atmosphere. This is an advanced technology with latest feature for
temperature control, pressure control and metal quality round the clock.
This system ensures high productivity, low rejection and process
DEVELOPMENT & TESTING:
The Company`s R&D team is highly skilled and competent to take up the
challenges in the field of Development & Testing. The Company has a set of
skilled professionals who carry immense work experience in this domain.
Improvements in the casting process are a constant endeavour to reduce the
final lead out time, enhance quality and raise customer satisfaction.
The Company realizes that the best product can be delivered to the customer
when care is taken from the design stage up to the manufacturing stage.
Hence the Company identifies the possibilities of probable
failures/setbacks at the design stage and works aggressively in a cross
functionality team to cohesively understand the development of a new
product. A virtual simulation environment helps to comprehend the casting
flow process and considerably aids the Company to understand any defects
that may arise and hence counter measures are taken immediately.
The Company is progressively aiming towards building a strong and cohesive
research and development facility which is an inspiration for all within
the casting industry. The Company aims to simulate the sand casting flow
process and is striving to attain excellence in this field in order to
conserve the environment. Procurement of advance testing machine, like the
Bench Flow testing, gives the Company a superior edge and inclines the
confidence of the customers more towards the Company.
C. FOREIGN EXCHANGE EARNING AND OUTGO:
Total foreign exchange earned : Rs. 407.11 Million
Total foreign exchange used : Rs. 223.23 Million
Detailed information on foreign exchange earning and outgo is also
furnished in the notes to accounts.
MANAGEMENT DISCUSSION AND ANALYSIS
IN THE BACKDROP OF A SLUGGISH GLOBAL ECONOMIC ENVIRONMENT. THE YEAR 2011-12
SAW THE DOMESTIC DEMAND DRIVEN ECONOMY HIT HARD BY HIGH INFLATION. INTEREST
RATES. RISING GLOBAL COMMODITY PRICES. LACK OF REFORMS AND DELAY IN
IMPLEMENTATION OF PROJECTS. INDIA`S GROWTH IN 2011-12 STOOD AT 6.5%. MUCH
LOWER THAN 8.4% IN THE PREVIOUS YEAR MAINLY DUE TO POOR PERFORMANCE OF THE
MANUFACTURING AND AGRICULTURAL SECTOR. THE MANUFACTURING SECTOR CLOCKED A
FEEBLE 2.5% IN 2011-12 COMPARED TO 7.6% IN 2010-11. THE AGRICULTURE.
FORESTRY AND FISHING SECTOR STRUGGLED WITH GROWTH OF 2.8% LAST FISCAL. AS
AGAINST 7% IN 2010-11. MOVING FORWARD THE OUTLOOK FOR THE COUNTRY REMAINS
CLOUDED DUE TO A COMBINATION OF HIGH INFLATION AND POOR DEMAND. BOTH
EXTERNALLY AND INTERNALLY. WITH PRICE PRESSURES EXPECTED TO PERSIST. THE
DEFICIENT RAINS HAVE AGGRAVATED THE PROBLEMS BEFORE INDIA.
IN THE FACE OF GLOBAL HEADWINDS PARTICULARLY FLOWING FROM FURTHER
TURBULENCE IN EUROPE. THE INTERNATIONAL MONETARY FUND SCALED DOWN ITS
ESTIMATE OF GLOBAL GROWTH IN 2012 TO 3.5% AND ALSO REVISED THE PROJECTION
FOR INDIA`S GROWTH IN CALENDAR 2012 TO 6.1% FROM 6.8% IN THE JULY 2012
UPDATE TO ITS WORLD ECONOMIC OUTLOOK RELEASED IN APRIL 2012.
A fundamental industry, metal casting is critical to the success of the
manufacturing sector mainly due to the production of high quality castings
which supports several Original Equipment Manufacturers (OEMs) across the
globe. The die-casting industry in India traces it origin way back to late
50s when it catered primarily to the automobile and the electric fan
industry. Due to a combination of adverse policies and restrictions on
import of machinery, growth in the castings industry was limited until
early 90s. Post 1991-following the liberalisation, rapid growth of the two-
wheeler and electrical industry the opportunity for the die casting
industry rapidly expanded. Later, the entry of global automobile and white
goods majors accelerated the growth of the die casting industry. It is
estimated that India currently has about 400 die casting companies out of
which barely two dozen players have the production capacity of over 12,000
tons per annum and out of this meagre number just a handful around 8-10
players including Alicon Group dominate the market. It is estimated that
India produces around 1.2 million tons of aluminium annually. The Indian
industry consumes around 0.45 million tons of castings of which 60 percent
(0.25 million tons) is die casting. The main industries being served are
the passenger car industry, commercial vehicle and two and three wheeler
industry. Die castings also has its presence in the electrical and white
goods industries and several other diverse sectors like healthcare, energy,
locomotives, etc. As per the North American Die Casting Association,
castings are used in nearly 90% of all finished manufactured products.
Aluminium castings due to the advantage of its lower weight (as compared to
steel) are used extensively by OEMs in various other sectors such as
automobiles, locomotive, medical, energy & agricultural segments. It is
estimated that the usage of aluminium in cars at the present level is 75 kg
per car in passenger cars. The world average is 125 kg and the total
aluminium content (Chassis & other BIW parts) is expected to go up to 150-
175 kg in the near future, indicative of the scope of increase in the die
castings in the near future for use in the Indian automobile industry. It
is estimated that die casting would account for about 50% of this usage and
in future low pressure die casting including cylinder head will account for
7-12 kg and compressor housing and brackets for about 2-3 kg.
The performance of the casting industry is linked to the overall
performance of various end user industries. During the year 2011-12, like
all industries, even the castings industry was challenged as OEMs across
the auto (2-wheeler and 4-wheeler) and other manufacturing and industrial
sectors faced challenging times due to the poor economic environment and
high interest rates which severely dampened demands.
However, to push the demand momentum, the industry players continued with
new launches comprising of a mix of hatchbacks, new variants of older
popular models and SUVs in 2011-12 with a special focus on improvising fuel
efficiency and enhancing performance. Some of the launches in 2011-12
included Toyota`s Liva in June, French premium sedan Renault Fluence in
May, Volkswagen`s Jetta, Honda Brio, M&M premium SUV XUV 500, Renault`s
Koleos in September and Hyundai Eon in October. A similar pace of
aggressive model refurbishment and new model launches were seen in the two-
wheeler segment too.
Sales of cars and utility vehicles grew by 4.7% in 2011-12 in which car
sales grew by a mere 2.2% on account of increase in vehicle price, rising
fuel prices and hike in interest rates which has made ownership dearer than
the past. Production troubles caused by labour issues at few major player`s
plants affected production, severely limiting growth already battling a
slowdown. Further, the industry witnessed a huge shift of demand towards
diesel vehicles owing to the widening gap between petrol and diesel prices.
Limited availability of diesel engines restricted growth in sales.
In the 4-wheeler segment, Alicon`s esteemed clientele includes Audi, Honda,
Volkswagen, Piaggio, Maruti, Eicher, Fiat, TATA, VOLVO, Mahindra, Ashok
Leyland and many more. The demand from castings from OEM in the segment
continued at a steady pace and the ability to keep pace with the new
product developments which were launched during the years pushed demands.
Alicon`s key customers in the 2-wheeler segment include: BMW, Bajaj Auto
Ltd., Hero MotoCorp Ltd., Honda Motorcycle & Scooters India (Pvt.) Ltd.,
KTM Sportmotorcycle AG, Suzuki Motorcycle India Pvt. Ltd., and Yamaha Motor
Pvt. Ltd. The demand from castings from OEM in this segment continued at a
Castings also find applications in the healthcare sector especially in
medical segment. Castings are used in various medical equipments including
hospital beds, dental X-ray units, portable medical monitors, ultrasound
equipment, hand held medical devices.
During the year, the healthcare sector continued to generate steady demand
and the Alicon castings found acceptance with various tier I and global
majors such as GE, Siemens and Philips medical system. Rising incomes,
increasing health consciousness, affordability, and penetration of health
insurance has promoted the growth of the healthcare sector in India. In
fact, medical practice is undergoing a paradigm shift from "treating" to
"early detection and prevention" which requires the production of various
medical equipments. The wide opportunity potential provided an excellent
cushion to the difficult conditions witnessed in the auto sector for the
Another key area where castings sector contributes largely is the power or
energy sector. In order to sustain its growth momentum in the long run,
India requires its power supply to be ramped up by more than four times of
the current levels. Renewable energy will play a key role for the sector
indeed. From 2011 to 2016, the overall power generation capacity of India
is projected to increase by an annual average rate of 6.76%, which
indicates towards the level of 1,316 terawatt hours of power generation.
The growth in this sector ultimately percolates to a demand push for the
In a year, where achieving break-even levels was a struggle for many, the
Company recorded impressive numbers and continued to outperform the
industry. The sustained revenue momentum over the past three years
showcases the success of the Alicon`s integrated business model. Further,
the results also showcase the ability not just to survive after the de-
merger of Enkei Wheels but rather push the boundaries of success to new
levels. The technical expertise from Enkei has enabled Alicon to establish
globally competent manufacturing facilities and processes in India for
aluminium die casting. Well established quality control systems, cost and
record of timely delivery paved the path to developing a prestigious
Alicon continued to remain at the forefront of the aluminium casting
industry and enjoys the distinction of being a single source supplier of
many critical castings to some of India`s largest OEMs. The company
continued to serve its prestigious customer base while focusing on the
development of new products and value-additions through ongoing R&D. During
the year, the company`s in-house R&D initiatives were recognised by the
Department of Scientific and Industrial Research, Ministry of Science &
Technology, Government of India.
The ability to offer castings for different variety of vehicles (2-
wheelers, cars, buses, tractors, infrastructure equipments) provides a
broader access to diverse target audiences (retail consumers - both urban
and retail, farm and non-farm sectors, private corporate sector and public
sector including defence). This provides a cushion in an adverse
environment as visible in the Company`s performance (both standalone and
consolidated) during the year.
During the year under review, the Company remained focused on making
further inroads into non-auto segments including healthcare, energy,
agriculture, aviation and defence. As rapid product development plays a
critical role in these sectors, the Company remained focused on rapid pro-
typing, designing and developing new castings for these identified sectors.
The migration of the technology and process excellence learning from the
European subsidiary Illichmann Castalloy, specifically for the non-auto
sector, provided the company a business edge as flexibility in our
production management improved significantly. The ability to provide
precision aluminium casting for both small quantity as well as large
volumes for a variety of applications in the industrial space has played an
important role in attracting new customers.
Some of Alicon`s non-auto sector customers include Crompton Greaves,
Greaves Cotton, Ingersoll-Rand plc., Cummins India, Bosch, General
Electric, Siemens, JCB India Limited, Enercon Services, Royal Philips
Electronics, Knorr-Bremse AG, Doppelmayr Seilbahnen GmbH, amongst others.
Exports accounted for 10% of the total revenue and mainly to USA, the
impact of the turbulence in EU was insignificant to the business.
THE COMPANY PLACED SPECIAL EMPHASIS ON ACHIEVING HIGHER EFFICIENCIES ACROSS
ITS OPERATIONS. KEEPING THIS KEY FOCUS IN MIND. ALICON CHOSE TO CONSOLIDATE
ITS OVERSEAS OPERATIONS. THE OPERATIONS IN AUSTRIA HAVE BEEN CONSOLIDATED
TO THE MORE COST-EFFICIENT SLOVAKIAN FACILITIES. AUSTRIA WILL CONTINUE TO
PROVIDE THE REQUIRED MARKETING SUPPORT TO ACCESS NEW MARKETS. DUE TO THIS
RESTRUCTURING. THE MANPOWER AND MANUFACTURING COST WILL COME DOWN IN BIG
WAY. THE RESTRUCTURING PROCESS WILL BE FINISHED BY END OF CALENDAR YEAR
The Company`s Total Revenue for 2011-12 stood at as Rs. 3818.85 million
against Rs. 2584.68 million in 2010-11 registering a growth of 47.75%. The
increase is driven primarily by sustained demand in domestic automotive
industry as major global players have set up their manufacturing facilities
in India for the domestic market as well as for exports.
The Company`s revenues in the automotive sector accounted for 97.60% of the
total revenue with the non - automotive business growing steadily.
The key raw material for the Company business is aluminium which witnessed
prices volatility. Average price increase for aluminium during 2011-12 was
in the range of 10% in comparison with previous year average price.
However, the Company through long term arrangement with its major customers
has a clause for external non business cost escalation and passes the price
differential on to the customers, therefore raw material prices did not
have any absolute impact on the Company`s earnings.
Manpower cost increased by Rs. 149.58 million for the year ended March 31,
2012 compared to the previous year, primarily as the result of growth in
the business and salary rationalisation.
Energy cost increased by Rs. 56.20 million for the year ended March 31,
2012 compared to the previous year. This is 22% increase against increase
in sales by 48% in spite of substantial increase in petroleum prices.
The Profit Before Interest Depreciation and Tax (PBIDT) increased to
Rs.552.34 million from Rs. 398.85 million during 2010-11, a significant
growth of 38.48%.
Interest expense (net) increased by Rs. 36.27 million for the year ended
March 31, 2012 compared to the previous year, primarily as the result of
growth in the business and new investments.
Profit before Tax (PBT) amounted to Rs. 279.60 million as against Rs.185.95
million during previous year, recording an increase of 50.37%. The increase
in profit was driven primarily by increased volume, better margin in non-
auto segment and cost reductions achieved from various operational
efficiencies measures implemented during the year.
The Net Profit was Rs. 220.09 million as compared to Rs. 146.31 million in
the previous fiscal representing an increase of 50.44%.
STRENGTHS, WEAKNESSES, OPPORTUNITIES & THREATS:
The die-casting industry is an important supplier to various sectors that
play an important role in the growth, development and modernisation of
India. Some of these sectors include Automobiles and auto components,
Railways, Power sector, Agricultural industry, Earth moving machinery,
Industrial & Agro machinery sector (Pumps, compressors, valves, pipes and
pipe fittings, electrical), Textile, Cement, Machine tools & other
The key strength of the aluminium die-casting industry is the ability to
design, manufacture and supply international standard, high quality,
precise and flawless casting solutions customised to the diverse usage of
various industries at cost-competitive rates. This strength is a result of
the investments made by the casting industry in modern technology and
research and adherence to internal standards of quality across the entire
value chain right from rapid pro-types to the final product.
The country`s strong engineering pool of talented professionals with deep
experience and sound skill act as important sources of growth. Key industry
players have also adopted and certified plants with global best practices
and evolved modern shop floor practices including 5-S, 7-W, Kaizen, TQM,
TPM, 6 Sigma and Lean Manufacturing.
From the demand side;, India`s huge population, a growing economy, rise
income levels, increasing purchasing power, growing consumer aspirations,
increasing urbanisation and lifestyle changes have led to a slow but steady
transformation of the Indian cities and fuelled the demand for a variety of
consumer products, automobiles, white goods, etc. The ability of these
industries to deliver world-class products at cost competitive strength is
derived from equally cost-competitive and quality conscience OEMs vendors.
The Government`s thrust on core infrastructure development is an important
The ability to service these fast growing sectors, which constantly
innovate and evolve new products and casting solutions at the same rapid
pace, vindicates the robust designing, engineering and manufacturing
strength of the casting industries. The industry today services not only
leading Indian corporate but industrial global giants who set the global
benchmark for quality and excellence. By virtue of serving the global
industry stalwarts across a spectrum of industries has increased the
investments in technology, engineering, manufacturing and R&D. The ability
to year-on-year meet the timely requirement also evolved the core supply
chain management ability of the industry which is also it key strength
The Indian casting industry traditionally suffered from poor quality and
high cost and was dominated by fragmented unorganized players. Several
industry players have equipment and machinery which is over a decade old.
However, over the years the organised sector has graduated to an industry
with a global outlook, be it in design and development or with respect to
cost effectiveness and flexible production. Across the organized industry,
key players have invested in globally at par technology and have adopted
stringent international standards across each key process ensuring
precision, flawless quality and timely delivery.
The opportunities for the castings sectors are dependent on the dynamics of
the diverse sectors which will play an important role in maintaining the
Slower income growth and subdued consumer sentiment are key constraints to
short-term growth prospects over a high base. Rural demand (40% of the
total demand) is expected to slow in 2012-13 given the sluggish growth in
the agricultural sector. Growth for 2012-13 is expected at around 10-12%,
in line with the long-term growth trajectory of the industry. Incremental
capacity of 6.5-7 million units accounting for almost 35-40% of the
industry wide capacity is expected to come on stream in the next two years.
(Source: Crisil Report. March 2012)
However, supply-side impetus in the form of improving finance scenario
(stable or lower interest rates), entry of new players and product launches
in high-volume segments is expected to provide some buoyancy to the demand
by end of the year. Major new launches in the executive motorcycles and
scooters segment will drive growth along with a turning interest rate cycle
and better finance availability.
As per a Crisil report the domestic passenger vehicle sales is expected to
grow by 10-13% in 2012-13 with a rise in small car sales. Increase in cost
of ownership and inflation is expected to be lower in 2012-13 as compared
to 2011-12 which will aid car purchases. While slower growth in income will
seek to limit growth, low base effect (due to production problems during
2011-12) and increase in diesel engine availability will aid growth.
Further, the current duty structure is favourable for those OEMS who have
opted for localisation. Therefore there is a possibility of higher growth
of the casting industry.
In the long term, India has several growth drivers in place:
* India today is the second largest producers of two wheelers in the world.
By 2015-2016 the industry`s output is expected to be twice the current
level. This reflects a real and significant opportunity potential for the
die casting industry.
* A huge opportunity is also emerging as more multinational automotive
manufacturers find their way into India.
* The country also has an excellent potential to emerge as the global
sourcing hub for the world automobile market.
* Dollar - Rupee exchange rates will provide a boost to export.
* Improvement in infrastructure will lead to better roads, improve
connectivity across various cities and states and in long run push the
demand for automobiles. As per a KPMG report, vehicle penetration in India
is quite small, even in comparison to other Asian countries. In passenger
vehicles, for example, India has 8 vehicles per 1000 people, which is lower
than countries like China and Thailand.
The estimated size of the Indian healthcare sector comprising hospitals,
pharmaceuticals, diagnostics, medical equipment and supplies and medical
insurance industry was pegged at USD 50 billion in 2010 and is expected to
touch USD 79 billion by 2012 and USD 280 billion by 2020. Medical equipment
and supplies contribute about 9% of the total healthcare revenues in the
country. Some of the most promising sub-sectors in the healthcare and
medical equipment sector include Medical Infrastructure, Surgical
Instruments, Medical Imaging, Electro medical equipment, Orthopedic and
Prosthetic Appliances, Ophthalmic Instruments and and many others.
Growth of the sector is fuelled by the rising income levels, health-
consciousness, affordability, penetration of the healthcare sector and the
proliferation of the international standard of early detection and
diagnosis of lifestyle diseases and their detection rather than mere
treatment. Medical diagnostic products and services help accelerate the
pace of scientific discovery and solve analytical challenges. These
products are increasingly necessary as they have led to a paradigm shift in
treatment of infectious diseases (such as Hepatitis, Cholera, Tuberculosis,
etc.), genetic DNA testing for genetic disorders, transplantation of
organs, Neurodegeneration (Alzheimer`s diseases amongst others), Oncology
and Life style diseases (Diabetes, Cardiovascular Diseases).
The opportunity horizon can be gauged from the fact that several renowned
international players have entered the diagnostic and surgical equipment
market in India (Baxter International Inc., GE Healthcare, Johnson &
Johnson Services Inc and Boston Scientific Corporation).
The company supplies casting components to the medical equipment industry
and some of its key customers include Philips Medical System, GE Medical
and Siemens who are expanding their market share in the Indian health care
India has emerged as one of the fast growing economies in the world after
having recorded an annual average growth rate of 8% during the last four
years. The energy sector will play an important role in supporting India`s
economic growth trajectory. The rapidly growing industrial base,
urbanisation, as well as improvement in the standard of living have widened
the gap between energy demand and supply. The Government of India has
ambitious plans of augmenting the power sector growth and has set a target
of adding 78,000 MW in the 11th Plan, a capacity growth rate of nearly
9.73%. To accelerate the power development equal emphasis has been paid to
the development of renewable green energy (wind, solar, hydro). Wind energy
is already a significant contributor to the power generation in the
country. With a capacity of 10,464 MW, India has the fifth largest wind
power installed capacity in the world. The solar insulation in the country
is one of highest in the world and major technology breakthrough in solar
could be the catalyst for the development of large solar farms in India.
Incentives and pro-industry policies through the National Solar Mission are
expected to boost the development of solar power generation capacity. Hydro
power generation too being a renewable and environmentally benign source of
energy has witnessed rapid growth with several mega plans underway across
Leading PSUs and private sectors players have planned to enhance their
manufacturing capacity to cater to the increasing demand. Several private
players have formed joint ventures with global equipment manufacturers and
the domestic power equipment manufacturing capacity is slated to reach at
least 25,000 MW in next 3-4 years. Given the need to secure reliable power,
the sector receives both Government and private sector investment and this
trend continues during the year.
The Company`s customer base in this sector includes Enercon, Crompton
Greaves, Areva, Siemens ,Wipro and GE who will be benefitted by the growth
in the power sector. As they are growing and diversifying in renewable
energy fields and nuclear energy, Alicon Group stands to gain from the
THREATS & CONCERNS:
Unlike the swift V-Shaped recovery from 6.8 per cent growth in the worst
phase of the global financial crisis in 2008-09, economic growth will
remain flat in 2012-13, the level of 6.5 per cent achieved in 2011-12. This
will make fiscal year 2012-13 the second consecutive year of lowest growth,
in the past decade. Industry growth is projected to improve to 5 per cent
over a very weak base of 3.4 per cent growth in 2011-12. A global slowdown
can derail the prospects of the industry.
Other threats and concern to the industry that may have to be confronted
* Volatility in the prices of metals and other inputs could erode the
industry`s cost competitiveness. Further, global OEMs expect a commitment
of 2-5% reduction in prices every year.
* Tier I manufacturers taking up green field projects overseas.
* Intense competition from counterparts in other emerging economies may add
pressure on margins of manufacturers.
* Dependence on technological advancement on west, Non*existent of R&D
* Dependence for high end and efficient equipment from Europe.
A combination of long term strategic planning and streamlined tactical
planning has enabled the Alicon Group to clock almost robust year-on-year
growth over the past three years. The Company remains committed to
sustaining this and will devote its energy to aggressively expand its
foothold across diverse sectors. The Company through its focused de-risking
aims to build an amicable mix across the auto and non-auto segment.
A foundation entrenched in world class technology and commitment to ongoing
R&D will play a critical role in both achieving entry into new segments and
also addressing the challenges faced across the casting industry.
The overseas acquisitions have provided a ready and well-established
platform of business relations with more global majors and the Company is
well poised to capitalise on this advantage at the right time.
RISKS & CHALLENGES:
Risks & Concerns:-
ABILITY TO INVEST ON CONSTANT PRODUCT DEVELOPMENT AT THE SAME PACE OF OEMS.
The Company is consciously working to increase the speed of development and
orienting the overall organisation focus to deliver new casting solutions
at a faster pace to keep up with the development of various OEMs. Ability
to offer integrated castings using in-house backward and forward value-
added services provides the Company an edge in achieving a faster
turnaround. The technological tie-up with international majors and the
acquisition in Europe will provide further access to modern technology
which will enable faster development of castings. The Company remains
confident of delivering world class casting solutions while accelerating
the production of new castings to always exceed customer satisfaction.
Risks & Concerns:-
ATTRACTING THE RIGHT SHOP FLOOR TALENT IN A HARDCORE INDUSTRIAL SET UP.
The Company is committed to making the core manufacturing facilities even
safer, cleaner and less hazardous to health by ensuring the foundries are
green. The concept of "Green Foundry" involves not only greening of the
surrounding facilities but through various well planned and well maintained
ambient air quality, reducing pollution and wastes and others means to
develop a people friendly working environment.
Alicon Group`s Safety, Health & Environmental management system is at par
with all applicable Statutory and Regulatory requirements, including OHSAS
18001 & ISO 14001. Furthermore, the Alicon Group has incorporated
environmental safeguards in all its activities and has made working in
harmony with nature and maintaining a Green environment, an essential part
of the core business commitment.
Risks & Concerns:-
MEETING STRINGENT EMISSION CONTROL NORMS.
The Company is working towards meeting the Euro VI and the BS notification
beyond BS IV. The Company will utilise both in house expertise and if
required may also partner with the right organisations to ensure its
products are compliant with required norms.
Risk & Concerns:-
PREDICTING THE ACCEPTABILITY OF NEW MODELS DEVELOPED BY OEMS IN THE
While the Company partners with leading OEMs in the product development
across the value chain, it is virtually impossible to predict the
acceptability of a new model as demand is consumer driven. For Alicon Group
highest value is derived and long term sustainable value is achieved when
demand is generated over the long run as that compensates the true value
for the time and money invested in new product development process. The
Company continues to partner and maintain long-term relationships with
major OEMs which have multiple product offerings across diverse target
Alicon Group is committed to developing policies that enable employees hone
their personal as well as professional skills, upgrade their knowledge and
capabilities. The Company`s policies have been evolved to nurture employees
keeping their overall interest in mind. To enable this the Company
regularly organises employee training programs both domestically and
overseas across all levels which are focused on improving competence,
productivity, enhancing safety and imbibing values and adopting
sustainability as a way of life. The Company also has well defined inbuilt
mentoring systems for key professional jobs.
Alicon Group seeks high performance with integrity while ensuring that
employees maintain a positive team spirit and keep the motivational levels
high. This is in keeping with its overall policy to encourage the
leadership approach at all levels while advocating ownership,
responsibility and discipline.
We have a well defined performance management system for the employee`s
career growth. The Company has a clearly defined DNA policy which acts as a
blueprint to all employees across the organisation as it clearly spells out
the organisation`s focus, lays down the priorities for employees, spells
out the expected performance standards and the key methods to achieve these
goals. Employees are educated on each of these aspects regularly through
co-ordinated internal communication systems. Illustratively, to optimise
productivity through maintaining an orderly workplace and reduce waste
Alicon Group follows the "5S" workplace organisational methodology as part
of continuous improvement or lean manufacturing processes.
The management of the Company continued to enjoy cordial relations with its
employees at all levels. As on March 31st 2012, the number of employees in
the Company were 1729.
INTERNAL CONTROL SYSTEMS:
Alicon Group has adequate system of internal controls commensurate with its
size and nature of business to ensure adequate protection of the Company`s
resources, efficiency of operations, check on cost structure and compliance
with the legal obligations and the Company`s policies and procedures.
The Group has engaged the services of M/s. Phoenix Consulting Group to
audit and review various relevant business operations and submit its report
to the Internal Audit Committee. The Audit Committee analytical reviews
these reports and the reports submitted by the internal Auditors and
further works to enable and facilitate the implementation of
recommendations made by the Audit Committee to further improve the
efficiency and address any possible lacunae.
To facilitate better operational and managerial control, Alicon Group has
set up an advanced ERP System, which will further improve the Internal
Certain statements in this Management Discussion and Analysis describing
the company`s objectives, projections, estimates and expectations may be
`forward looking statements` within the meaning of applicable laws and
regulations. Forward looking statements are identified in this report, by
using the words `anticipates`, `believes`, `expects`, `intends` and similar
expressions in such statements. Although we believe our expectations are
based on reasonable assumptions, these forward-looking statements may be
influenced by numerous risks and uncertainties that could cause actual
outcomes and results to be materially different from those expressed or
implied. Some of these risks and uncertainties have been discussed in the
section on `risks and concerns`. The Company takes no responsibility for
any consequence of decisions made based on such statements and holds no
obligation to update these in the future.