In conversation with Akshay S Pitti, Vice-Chairman and Managing Director, Pitti Engineering

"Government’s thrust on increasing spend on the overall development of infrastructure to boost the economy is a great positive step towards encouraging private investment, which would further fuel the growth of the economy", says Mr. Akshay S Pitti, Vice-Chairman and Managing Director, Pitti Engineering. 

What is your outlook on the capital goods sector specific to engineering products? What impact did the second wave of Coronavirus have on the sector?  

Pitti Engineering’s strength comes from its more than three decades of presence in manufacturing critical & precision engineering products coupled with working for leading capital goods and OEM players in the world. Our company manufactures components and sub-assemblies for various rotating electrical equipment including motors, alternators, mining equipment, equipment that goes into a steel plant, etc. Basically, anything that moves with electricity or generates electricity uses our product. Our products’ end-user is very diverse, and our customers include General Electric to Siemens to ABB, Cummins, Toshiba, and BHEL. We are the largest manufacturers of such components and assemblies in India. In the past five years, we have diversified the product portfolio to include casted/fabricated/forged machined components and shafts as well.  

With the gradual easing of the lockdown, order flow for engineering products has been progressing well, led by sectors like data centres, green power, industrials like cement & steel, irrigation, roadways, railways and power equipment. It also includes orders from emerging segments like electric vehicles (EV) from the international market. 

Capital goods players, operating mostly on just-in-time inventories, are countering a fully depleted inventory across the supply value chain. The pent-up demand shall help manufacturing companies like us to ramp up production to pre-COVID levels. Commodities’ price increase worldwide always follows capital goods demand due to the addition of vast capacities across capital goods players both domestically and across the world. 

Your company’s revenue decreased by 1.31 per cent during FY21. However, net profit registered a healthy growth of 68.30 per cent and stands at Rs 28.78 crore for FY21. What factors contributed the most in bringing profitability back on track? 

Despite a very bad first quarter because of All India Janta Curfew, we were still able to maintain our revenue almost at the same level as FY20. If you see our Q4 performance, we had made revenue of Rs 180 crore, which is an all-time high for us on a quarterly basis. We see ourselves growing around 25 per cent CAGR for the next 2-3 years. So, all the sectors, all end markets are robust and performing well. We have strong demand coming in from steel-related products as well as from the general capital goods sector. Indian Railways is also performing well along with export markets related to mining & locomotives. We see the outlook for the current year to be on a high growth trajectory as well.  

Engineering products catering to user industries like diesel and electric locomotives, data farms, consumer durables, and renewable energy form a large portion of our residual order book. It is encouraging to see emerging segments like power systems for data farms, propulsion systems for electric vehicles, various sub-assemblies for intercity passenger and freight movement, components for mass urban transit systems along with components & assemblies for renewable energy segments starting to make sizeable contributions to our order book now. 

We have recently declared our Q1FY22 results. Our revenue from operations stood at Rs 175.88 crore, as compared to Rs 61.55 crore in Q1FY21, registering a growth of 184.94 per cent. EBITDA was at Rs 27.95 crore, as compared to Rs 2.08 crore in Q1FY21, registering a growth of 1,243.75 per cent. Net profit was at Rs 7.40 crore, as compared to the net loss of Rs 9.78 crore in Q1FY21, an increase of 175.66 per cent. The board of directors has declared an interim dividend of 37.50 paisa (7.5 per cent) per equity share of the face value of Rs 5 per share. 

Governments of developed & developing nations are focussing on infrastructure developments and other fiscal policies of respective countries, which are fuelling the growth for high-end engineering products. How do you plan to tap this opportunity? 

Government’s thrust on increasing spend on the overall development of infrastructure to boost the economy is a great positive step towards encouraging private investment, which would further fuel the growth of the economy. Government’s thrust on infrastructure development, large irrigation projects, focus on green energy generation would really increase the demand for traction motors and other engineering products, which we are currently manufacturing in our state-of-the-art facilities at Aurangabad and Hyderabad. 

Government of India measures to make India a manufacturing hub will transcend into a major opportunity for the sector as a whole and Pitti Engineering in specific due to the nature of product and varied product applications, which caters to automotive, industrials, power generation & consumer durables.  

What are your top three strategic objectives?   

We expect to more than double our revenues in the domestic market in the next year. That is the kind of robustness in the growth that we are seeing.  The company’s strategy of moving up the value chain in the customers' supply chain by offering differentiated products manufactured by integrating multiple engineering processes like sheet metal, machining, fabrication as well as assembly & capitalising on its good establishment procurement network of components used in assembly or sub-assembly is playing well and increasing its share with the customers. 

We estimate that we are at the beginning of a multiyear growth cycle, which we have not seen for the last three decades. We are seeing strong demand for our products & services across various applications from multiple end-user industries including railways, steel, cement, sugar, power generation, urban mass transit, industrial consumer, to name a few. We are very excited for the opportunities coming from new applications and end uses for our products such as data centre, renewable energy, and 5G roll-out amongst others. Our utmost strategic objective is to gear up to meet the demand of our customers by scaling up our current facilities both in terms of automation as well as in size. 

Can you take us through your Rs 270 crore expansion plans outlined for the next two years? Also, tell us where you stand currently.

As a part of the company’s declared Capex of Rs 270 crore earlier, the company is in line with its strategy to gear up for global and domestic OEM’s demand, expanding its laminations as well as machining capacity at Aurangabad. The total lamination manufacturing capacity will increase from 36,000 MTPA to 50,000 MTPA. The machining capacity will increase from 2,47,600 machine hours to about 5,00,000 machine-hours, which would be sufficient for the next two years to achieve Rs 1,400 crore revenue.