Captain Speaks     

Published: december 31, 2023
Updated: december 31, 2023

Shivalik Bimetal Controls

JV with world leader in silver contacts

He noted, "At present this segment has registered a 25 per cent growth in the domestic market. We expect a pronounced upswing in market conditions and thus domestic market growth is expected to sustain going forward. Although global headwinds may persist into the next calendar year, the company anticipates that the 10-40 per cent growth range will return post Q4 FY2024 as we expect a minimum growth of about 10 per cent to 12 per cent on a bad-base basis. If market conditions and plans of the company go as per expected, we can register a growth beyond 30 per cent with a cap of 40 per cent."

NICHE LEADER

Metalor is a Tanaka group (Japan) company which is a world leader in the field of precious metals. The company is renowned for its expertise in silver contacts and state-ofthe-art silver melting facilities in several locations around the world. According to SS Sandhu, Chairman of Shivalik, "The company will undertake a feasibility study which will assess the value addition this partnership brings to the manufacture and assembly of silver contacts."

Analysing the company's performance in the Q2 FY2024, Mr Ranjan said that consolidated net sales (including other operating income) of Shivalik Bimetal Controls for the quarter ended September 2023 has increased 8.64% to Rs 127.76 crore. Operating profit margin has declined from 22.95% to 22.82%, leading to an 8.04% rise in operating profit to Rs 29.16 crore. Profit before tax grew 10.63% to Rs 27.37 crore. Net profit attributable to owners of the company increased 5.66% to Rs 20.34 crore.

For H1, consolidated net sales (including other operating income) increased 11.64% to Rs 254.96 crore. Profit before tax grew 2.66% to Rs 54.72 crore. Net profit attributable to owners of the company increased 1.66% to Rs 41.62 crore.

'TIGHT CONTROL'

He commented, "Our growth percentages are a result of our control mechanisms for operating leverage. We maintain a consistent growth trajectory, showcasing a steady growth rate for Q2FY24 where our strong control mechanisms for operating leverage have enabled us to maintain healthy EBIDTA and profit margins, reinforcing financial stability. As we complete Q2 and approach the third quarter, a pronounced upswing in market conditions is also expected as we have achieved a 25% growth in the domestic market. Although global headwinds may persist into the next calendar year, we are anticipating that the 10% to 40% growth range will return post-Q4FY24."

According to the CFO, the company has been growing steadily on a sustained path. During the last 12 years, its sales turnover has expanded more than five times - from Rs 79 crore in fiscal 2012 to Rs 420 crore in fiscal 2023, with operating profit spurting more than 17 times from Rs 6 crore to Rs 105 crore and the profit at net level shooting up over 24 times from Rs 3 crore to Rs 173 crore.

The company reported an increase in the return ratios with the return on equity (ROE) rising from 33.29 per cent in FY 2021-22 to 34.61 per cent in FY 2022-23, and return on capital employed (ROCE) increasing from 36.48 per cent to 38.18 per cent. The company is looking at the low and medium voltage electrical market. It is seeing more customer engagements in case of exports. The Americas may see some improvement in H2 but not completely

The volume mix in Q2FY24 is 61% Bimetal and 39% Shunts. In revenue terms, Bimetal:Shunt is 57:43 in Q2FY24. In the upcoming quarter, the mix will remain the same as that of Q2FY24. Next fiscal, the mix may reverse with the share of shunt improving. For shunt to revert to 50% of volumes takes quite a few more quarters. The capacity utilization of bimetals is currently about 33-34% and that for shunts is about 40%. Shunt capacity is a scalable mode involving vendors and suppliers. Other income constitutes a forex gain of about 90%, and the balance is revenue from small job work.

WORK UPGRADE

The company is focused on process improvement like automation, process inspection, especially end-of-line inspection, and efficiency/quality improvement such as cutting down lead time and reducing rejections. The management hopes these efforts will result in a 2% savings in gross margin. Shivalik is looking forward to expansion of the topline and bottomline in the current fiscal. Though at the middle of a global downward trend, indications are that customers are investing in capacities and new products which augur well for the company. It hopes to achieve its target in the next 3-5 years.