Notes from AGM based on interaction with Ex.MD Viraj Naidu and Lokesh saxena (MD).I could interact with one employee also during AGM which was quite helpful.
( There may be few mistakes from my side while noting down the points discussed)
Foundry industry- present situation and outlook: 4000 to 5000 foundries are presently opearating in India. With ongoing consolidation 1500 to 2000 foundries may remain. Presently 200 to 300 foundries are automated. This 200 to 300 are doing almost 80% of total foundry business. More than 100 lines are mechanised high pressure moulding lines primarily done by Disa. Disa market share is around 60%.
competitors in moulding business are kukai?.(.Europe), Japanese company citer Tokyo? for wheelabrator local competition and ?japanese company.( couldn’t recall the names properly).
DIL products/advantages and automation of foundries: Disa India has vertical and horizontal moulding machines(eg: IFLEX and ARPA horizontal). Horizontal machines which are traditionally used in India requires more manpower ,side pellets? ,jackets(not sure about these technical terms) and more cooling time. With vertical moulding no need of side jackets,pellets and less cooling time as well. Current trend is towards vertical moulding machines. The type of moulding to be used depends on casting. In general speed of vertical casting is double of horizontal . If customer wants more production, vertical moulding is ideal as long as technical side allows it, but it’s not always possible with certain castings. The quality and yield is better with vertical moulding. It has to run through continuously otherwise it will be loss for foundry. We are into automatic solutions only. We had/have semi automatic product called arpa but market is not choosing that any more.
Our machines run on very high speed automation production process. Don’t think that all the 4,000 foundries gets automated. Currently 6 to 8% are automated. Our automated products mainly benefits owner with less manpower requirement. Till now we were seeing brownfield expansion in foundries but greenfield expansion has started.Presence of thousands of smaller foundries is an opportunity for us to sell more. Smaller ones are getting smaller. Not easy to raise the selling price depends on customer. Aftermarket demand for spare parts/servicing has gone up due to high utilisation level of foundries.
We have most of the machine customised as per local foundry requirement. No two machines are alike. We can demonstrate the foundry owner about cost saving /more productivity /quality with DISA machines compared to existing ones. Our cost may be higher to competitors but it will benefit to customers.Capital equipment like foundry machinery are sold on technologies and returns it offers to owners. Our cost may be high but it helps in saving and increasing productivity It will increase the productivity.If the foundry owner doesn’t want to increase his productivity/revenue we can’t help much. End customers are demanding good quality casting from foundries (e.g: endurance which never use to buy our machines have recently started buying from DISA as demanded by end customer). Our quality is such that no foundry will install machine without enquiring about disa machines at least once.New products launched like Disamatic have been doing good. At least ⅓ rd of revenue comes from products launched in last 7-8 years.
Many good things are happening in India. Increases in loading limit by govt is positive as the casting requirement goes high. First time in India overloaded vehicles are fined, So people are looking for bigger trucks. Bigger trucks were not popular in India due bad road conditions which is improving now. People were not ready to invest in bigger trucks as they use to wait long at check posts . Now with Gst and reduced waiting time people are ready to spend more for bigger trucks justifying the investment.
Demand cycle: Demand depends on auto industry and tracks growth in HCV and tractors( we are not in the segment of car/2 wheelers). Growth in heavy vehicles and tractor will determine our order book. Euro VI is hitting on April 2020. We are witnessing pre-buying now. What will happen after 2020 and how the cycle will swing we have to wait.
Capacity expansion: Current capacity enough to fulfil the demand. With existing capacity we can do 250 Cr easily. Our machines/ process has been more efficient now. With little modifications it’s possible to reach 270 to 280 cr. We have done expansion / added equipment thinking of good growth four years back which is coming now. Presently no plan to expand. If we see the demand exceeding capacity we will expand. It will take one year to set up new plant.
DIL outsources lot of work. Tumkur plant does machining/fabrication and assembly,at Hoskote only fabrication and assembly. We have stopped fabrication completely and outsourced it. Machining also we retain only critical core parts ,where we can’t relay on outsider. It’s gives us flexibility to use capacity in high demand situation.
Due to efficient equipment added in last few years our delivery time has reduced. Current environment there is nothing like slow moving orders. presently customers are picking up the machines as it’s completed.
Disa India for parent company: nothing has changed for parent company as Viraj Naidu(ex.MD) has moved up in global position. Disa India has been focus area for company and will remain bullish on India. Growth which was expected to happen from 2012-13 is started happening from 2016-17. Certain products are made like flex machines and mixers are exclusively manufactured at DIL.
High speed Disamatic are manufactured in Denmark factory but lower speed Disamatic machines suited for upgradation of smaller foundries in India. Below 250 moulds per hr products are localised to India. We can manufacture high speed in India but volume and demand for the same is not suitable at present.
Wheelabrator shot blasting machines: We have literally localised all production of wheelabrator to India.
Exports: This year exports haven’t shown growth as anticipated.That is due to certain issue . Definitely exports will grow. But as percentage it may not much difference as India business will grow better. Exports are depends on tariffs/forex movement which are hard to predict. Will do business on region wise like EU region/NAFTA,India/China region. China market size is five times higher but our market share is less as we started late. Czech Republic is important plant for wheelabrator products.Other export markets for us is Brazil/Middle East/South Africa.Middle East has good potential market for Disa India. Sales team work on geographic wise to make sure not to compete with other group companies.
Acquisition of light metal casting by parent company: It opens new market opportunity of aluminium casting for us. We have aluminium die casting machines /furnaces at other group companies( italpresse gauss / striko westofen). All three combined we can offer full aluminium casting solutions. Aluminium casting has been growing at much faster speed than iron casting. It offers opportunity for Disa India to sell machines to aluminium casting customers .These machines are primarily manufactured at Italy plant. Furnaces and melting machines manufactured at Germany and China as of now. Low metal casting had selling agent in India. We are consolidating it now. As of now there is no revenue from this segment, as it is imported and sold here. We may get selling commission from next year.
Bhadra castalloy: It was acquired keeping wheelabrator requirement of casting parts which we use to buy from outside. As such for Indian wheelabrator we need limited casting but keeping in global requirements for wheelabrator spare parts we acquired it. It has started contributing to growth due to local requirement of wheelabrator and partly due to exports as well. Norican as a group has 3 foundries each at UK,Canada and India . These three can not meet the complete demand for group.
Filters: contributes around 15% revenue. Called as fume extraction systems . Basically filters are used in all foundries to extract the dust. Other industry like steel/sand/pharma wherever there is dust/ particulate matter is coming out filters are used. It has wide general application including manufacturing of baby diapers where small particulate material which is important to absorb soaking is filtered from flying out while manufacturing and reused…Govt regulation for environmental reasons also helping it. Disa filters are of high quality, in fact they will meet more than the standards set by Govt. When the authorities visits factory and found that disa filters are in use they won’t question more. In our revenue ½ of filters sold are with disa machines and remaining half is sold as separate stand alone product. Have local competition but we choose are segments with better margins. Filters are manufactured at Hoskote plant.
Order book to sales : depending on products like moulding machines take 9 to 10 months for completion and others like wheelabrator products .take 4 to 6 months for completion. Average of nine months.