Pitti Engineering Ltd

Dear Shareholders,

At the outset, we would like to thank all of you, our valued customers and stakeholders, for your continued support. Before we dive into our performance for the fiscal year, it is worthwhile to first consider the macroeconomic landscape in the year gone by.

The global operating environment continued to be uncertain during the year, with sticky inflation and persistent geopolitical conflicts. However, the global economy has been surprisingly resilient, despite major Central Banks increasing interest rates to curb inflationary pressure. India continued to be a bright spot on the global economic landscape, registering 8.2% growth in real terms and the Central Government reduced the fiscal deficit by a considerable margin.

According to the Economic Survey for 2023-24, the Indian economy has broadly caught up with pre-COVID growth trends and is likely to grow by 6.5% to 7% in 2024, with prospects of registering 7%-plus growth in the coming years.

For us, consistently adapting to customer needs, creating niches and accelerating growth have always been part of our DNA. We will continue to embrace this philosophy as we go forward. We focused on making margin-accretive value-added products. This has led us to transition from being a lamination-led company to a multi-product offering business. Powered by vertically integrated manufacturing, a portfolio of products catering to diverse end-user industries, steady cashflow, strong relationships with clients and business partners, we have delivered an impressive 3-year Compounded Annual Growth Rate (CAGR) across various financial and operational metrics.

Despite transient challenges in FY24, we at Pitti Engineering are jubilant to have crossed new milestones. We also registered significant growth in sales volumes, EBITDA and net profit. Our sales volume for the year surged by 16.55% to 42,305 metric tonnes, total revenue grew by 11.79%, reaching H 1,249.81 crore, EBITDA rose by 17.39% to H 177.72 crore, net profit increased by 53.32%, to H 90.20 crore and cash accruals improved by 39.38% to H 144.22 crore. Our blended EBITDA per metric tonne stands at H 42,008 per metric ton. During the year, we incurred a capex of H 209.37 crore.

Moving on to our operational highlights, during the year gone by, we developed major value-added products for our global clientele. We successfully delivered fully finished stator frames along with lamination cores, ready for winding into traction motors, for prestigious customers. By integrating casting, forging and lamination facilities, we created value-added products that enabled our customers to optimise their ground-level manufacturing activities through enhanced cost efficiency.

In alignment with the government's ‘Make in India' strategy, we contributed to the ramping up of Vande Bharat trains by developing value-added products for a total of 18 projects.

On the global front, we delivered critical components, including wheel hubs, support seals and more, for overseas OHV mining customers. These products required the integration of technical expertise in areas like critical fabrication, forging, heat treatment, machining and so on, made possible through the strength of our business model and organisational competencies.

Further, we assisted the Indian railways by enhancing the supply of 6FRA products to traction motor manufacturers.

We have significantly bolstered the wind power generation sector by providing comprehensive support for projects up to 5 MW, supplying top-tier products to renowned international clients.

Additionally, we developed and supplied critical parts for electrolysers used in green hydrogen production to one of our overseas customer.

By consistently supplying fully finished stator assembly cores, duly machined and ready for winding (RFW), for mini hydro plants, we contributed to a clean and renewable energy source globally.

Last but not least, we developed products for marine applications, such as electric power propulsion systems, which replace thermal combustion engines and help reduce global warming.

Going forward, we anticipate continued growth in the demand for our products and services. In line with this, we have acquired Bagadia Chaitra Industries Private Limited and are in the process of commissioning expanded capacities in the Aurangabad facility. These initiatives will increase our consolidated capacity from 56,000 TPA to 90,000 TPA, further strengthening our position as India's largest manufacturer of laminations. Additionally, this acquisition provides us with a strategically important manufacturing base in Bengaluru. With its proximity to other large consumption centres such as Coimbatore, Chennai and Hubli, it significantly improves customer serviceability in these regions.

We are particularly optimistic about the growth prospects of our machined component vertical. The input materials required for this are high-quality castings and customers impose stringent clauses on the sourcing of such castings. To facilitate the same and eliminate as many related-party transactions as possible, we decided to merge the promoter-owned casting business, Pitti Castings Private Limited, with Pitti Engineering Limited. This merged entity will bring in marquee clients as well as boost the development of machined castings for existing clients.

Upon the commissioning of new capacity at the Aurangabad facility, we will begin decommissioning the lamination capacity in Hyderabad. The vacated space will be repurposed to house increased machining capacity. We also have plans to reorganise our consolidated business to derive material synergies and reduce logistics costs.

We are committed to making our operations cleaner and greener. As part of this endeavour, we have undertaken a plantation project which will be spread across eight acres of land for planting ~36,500 trees at our manufacturing facilities. We are also working to substantially raise the contribution of renewable energy to our fuel mix as an endeavour for transition to net zero in the future years.

We are confident that these initiatives will pave the way for sustained success, driving impressive growth in both sales and profits and ultimately benefiting all our valued customers and stakeholders.