Aaron Industries Ltd- The Elevator Play

Seems typo error…will complete in Jan 23

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Aaron Industries installed steel embossing machine.

Steel Embossing machine impresses patterns on stainless steel sheets.Import substitute as 90% of such sheet was being imported to India.

Only company in India capable of offering more than seven varieties of embossing patterns on stainless steel sheets
AARON_22022024111733_PressRelease_22022024.pdf (1.6 MB)

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Aaron Industries acquired new machine from Salvagnini for the fabrication of elevator components. Production capacity to multiply by at least 3 times, lead to better efficiency and quality with reduction in costs.
AARON_01032024123109_PressRelease_ImportofSalvagniniMachine_01032024.pdf (1.6 MB)

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Capex Update:

As per the recent quarterly results of Mar’24, we have noted the CWIP of Rs 26.90cr, which is more than the double of existing net asset block. The majority of the capex is allocated to the Greenfield project at Unit 3 in Block No.251, Plot No.B-2, Royal Industrial Park, Vill. Moti Pardi, Ta. Mangrol, Surat - 394120, Gujarat, India. This unit is outfitted with machinery purchased from Salvagnini particularly for the manufacture of elevator components. This advanced equipment is currently in the installation phase.

The company has also engaged in brownfield growth, including upgrades to existing machinery. These changes are designed to boost productivity and operational efficiency.

The unit 3 is expected to be operational by July 24 and remaining capex will be completed within next 2 months.

Two new branches opened in 2023-2024, one in Ahmedabad and the other in West Bengal. These new branches are now in the early stages of expansion, and their performance is expected to significantly impact the company’s results in the current fiscal year 2024-25.

Reason for drop in elevator segment margins:

In the latest quarterly results, we saw compression in the margins of elevator segment, with the operating margins dropping from 47% to 36%. As per the management, below are the primary facts underlying the drop in margins:

Inventory Management: Company has proactively removed dead stock, which while necessary for operational efficiency, impacted their short-term margins.

Optimized Inventory Levels: To improve their inventory cycle and avoid tying up finances, company has adopted a strategy of maintaining lower inventory levels. This strategic shift, though beneficial in the long term, has contributed to the margin reduction in the short term.

Going Forward:

Post completion of capex by Ju’24; the company is expecting a significant improvement in top and bottom-line. Further company has no requirement of further debt in FY 24-25. Their main focus remains on efficiently managing their existing resources and ensuring the successful completion of Unit 3.

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