MD's Communique
Dear Shareholders,
I am happy to be addressing you through our annual report. This is such a great
pleasure and a good opportunity for me to share more insights about our Company, Permanent
Magnets Limited.
As you can see, we have expanded the scope of our annual report this year to give our
investors a deeper understanding of our Company's business model, industry positioning and
strategies, both long and short term. I believe this will also be an excellent opportunity
for me to connect with you better, and strengthen our relationship further.
FY22 Performance Review
I would first like to take you through our performance this year, and give you an
overview and help you understand the Company's financial standing. To begin with, our
topline for the last two years has not grown the way we expected it to, and a combination
of factors is responsible for this. Firstly, our business was impacted significantly due
to the pandemic-induced supply chain disruptions, which were closely linked to some of our
end-use industries facing the same issue. For instance, the energy meter sector faced
severe heat on account of semiconductor shortages that led them to reduce production,
thereby making the demand for our product lesser or deferred. The second factor that
impacted our topline growth is the downturn in one of our product categories - gas meters.
This product was already nearing the end of its lifecycle, and these headwinds changed our
revenue mix as well. Earlier in FY20, the contribution of gas meters to our top line stood
at roughly 18%, which in FY22 declined to a mere 6%. Product life cycles coming to an end
certainly is not an unknown phenomenon in the industry, but this particular one did catch
us off guard a little bit.
The other issue that we faced during the pandemic was a slowdown of our geographic
expansion plan on account of travel restrictions. As most of you would be aware, Europe
and the Americas continue to be a stronghold for PML, but our efforts to embark on our
Asian geographic expansion were dampened by the multi-year pandemic. However, we are
certain about picking up on these plans and making progress in these markets as well in
the near future. While all of these headwinds and concerns made the year slightly
challenging for us, it indeed didn't impact us negatively - we were able to demonstrate
resilience through our financial performance. Our Revenue from Operations witnessed a
modest 13% year-on-year growth and stood at Rs.133.26 Crore in FY22, while our PAT stood
at Rs.19.04 Crores, recording an 18% increase year-on- year. Our operating profit margin
stood at 21% this year compared to 22% in FY21. Further, the size of our balance sheet has
certainly increased in the last two years on account of the increasing working capital
needs of the Company. Moreover, as a part of our risk management strategy, we now have a
higher buffer inventories for imported raw materials such as special steels and nickel
alloys, among others.
Focused on technology development over product development
A fundamental lesson that we have learnt in the past as well as in recent times is that
product life cycles can be unpredictable, and if not planned for properly, they can have a
significant impact on business growth.
We have witnessed this recently with our calibration assembly product for gas meters,
and faced a similar concern for our magnets business due to a change in the energy meters'
technology, back in 2005. Essentially pointing to us that changing end-product
technologies may many times make our products obsolete. What we have acknowledged and
understood from these trends is that, in order to maintain our growth trajectory, we must
consistently add newer products at a faster pace to counter the effects of products
approaching the end of their lifecycle. This learning has empowered us to realize that it
is much more advisable to focus on technology and capabilities rather than products.
Since technologies and capabilities tend to have a higher lifecycle than specific
products, it will ensure that we thrive in an increasingly fast-evolving future while also
allowing us to design and deliver innumerable customer-specific solutions.
At present, our technological strongholds include Magnetic Sensing, Current Sensing,
Magnetic Assemblies, Alloys and ZAMAK Die Casting, and the products we manufacture based
on these technologies find varied applications in the automobile, energy meter, renewable
energy, aerospace & defence, food & beverage and robotics sectors, among others.
Our goal is to develop more products leveraging these technologies and capabilities as
we advance, all the while making efforts to gain domain expertise in other technologies as
well. The new projects we are currently exploring include, in the casting space, ZAMAK die
casting, high-volume sheet metal forming, and wire winding. Simultaneously, we are working
on introducing new modules and components.
Increased presence in value-chain
PML has also strategized to expand its presence in the value chain - from being an only
component manufacturer, the Company is now exploring projects in modules to capture a
wider space in the value chain. In many product categories, a shift from components to
modules can render an increase in the value of the product to a factor of up to 5-6X on
the initial component. At present, we are exploring projects in the shunts and soft magnet
material product categories for different product stages. This move will help take us a
step ahead in our journey and create more significant avenues for growth in the near
future.
PML is preparing for the long haul and focusing on making its business model more
robust than ever before. We are confident that our focus on technology & capabilities
over specific products, increasing presence in the value chain and upgrading
infrastructure in accordance with future growth aspirations, will surely aid the Company
in achieving its long-term goals. In that direction, we have also decided to integrate our
three manufacturing facilities into one site, giving us enough headroom to grow in the
future.
We sincerely believe that the best of our years are ahead of us, and PML is geared to
harness potential opportunities and leverage its strengths to make itself an indispensable
part of its ecosystem. In closing, I would like to share my sincere gratitude to all the
shareholders, team members and stakeholders of PML. Your faith and trust in us have got us
this far, and I am sure that it will take us to greater heights in the years to come.
Thank you for all your support.