Intellect has been around for 8 years and has been developing products over this period. Technology evolves continuously. One does not re-platform/rewrite everything in one go. There are release or refresh cycles. One waits for critical mass or customer demand before refreshing the technology stack. In addition, there will be customers on older versions that need to be supported too. Intellect has been continuously investing in refreshing its technology stack. It wouldn’t be as new as some of the new entrants such as Mambu or Thought Machine but it does not seem old.

If you want to understand the industry, you can read the annual reports of IMTMA - Indian Machine Tools Manufacturers’ Association: https://www.imtma.in/

Read page 11 for aggregate growth figures for machine tools production, consumption, import-export in the annual report.

Machine Tools are broadly classified into a 4 x 4 matrix:

• Metal Cutting (CNC and non-CNC)
• Metal Forming (CNC and non-CNC)

Other technologies like 3D Printing, Water-Jet, Ultrasonic Machining are too niche and can be ignored for now.

Complexity of CNC machine is usually defined by the following:

• Number of CNC Axis starting from a single axis CNC to multi-axis CNC machines (can go as high as 5 to even 7-axes in some special purpose CNC machines)
  • Higher the number of axes, greater is the complexity
• General purpose CNC machine (GPM) or special purpose CNC machines (SPM)
  • GPM can be sold in larger volumes but have comparatively low margins
  • SPMs have very high margins but low volumes
• High spindle speeds and high-power machines are more complex and expensive to build
• Large CNC machines which can be used for machining large components in heavy engineering industries such as Oil & Gas, Steel, Shipping, etc. are highly complex and sometimes a high-risk project in itself

Macpower’s machines mainly fall in the category of:

• Metal Cutting CNC Machines
• Low complexity (2 to 3 axes CNC machines)
• GPM
• Medium speed and medium power machine

Buyer’s Decision-Making Criteria:

Serious buyers will look for the following parameters before finalising a machine supplier:

• Proven design and existing customer feedback
• Application engineer to understand the customer’s job
• Machine & process capability (please read Cmk & Cpk for more details)
• After sales service capability and spare part availability in their region
• In-house capabilities for manufacturing, R&D, design and testing
• Timely delivery of machines as per committed specifications
• OEM’s honesty and credibility in handling customer’s component design data and advance payments (most of which are unsecured)

If you wish to assess a machine tools OEM as an investment opportunity, then you need to look at them from 3 parameters:

Customer Purchase Process

In a typical buying cycle, the customer will approach a machine tool OEM (Original Equipment Manufacturers) with a component drawing or job sample and the machine supplier needs to tell them the possibility of manufacturing the given component / components on their machine, cycle time, accuracy, repeatability, etc. Based on the nature of the job and production volumes, certain external features such as in-process gauging, automation for job loading & unloading, removal of chips/ fumes from the manufacturing process need to be integrated with the machine.

The OEM’s sales engineers must have very strong application engineering skills. The first sale could typically take you 4-6 months to close the deal. More than the machine features or price, it is the application engineering skills of the OEM that can make or break the deal.

Once the customer is satisfied with the first sale and prove-out, the subsequent machines sales are much easier for the same component. However, the entire application engineering cycle will have to be repeated for making a machine sale if it is a new component.

One of the major decision-making factors for buyers is the after-sales service network of the machine manufacturer. The machine OEM should have a large network of service engineers and easily available spare parts. This is a critical requirement of the buyers because their own production depends on the machine reliability and uptime.

Public sector units (Defence, Railways, Aerospace, Skill Development Centres, ITIs, etc.) are large buyers of CNC machines outside the Automotive & General Engineering Sector. Government tenders do not pay advances and involve large working capital and all the usual issues related to government procurement and delayed payments.

• Supply Chain:

Almost all the CNC machine tool manufacturers (Indian and Global) are dependent on Siemens and Fanuc for the electronic controllers, servo motors & drives, rotary encoders, etc. It is almost a global duopoly with players like Delta (Taiwan), Mitsubishi (Japan), Allen Bradley (Rockwell Automation) being fringe players. Since most of the users are comfortable with the controllers of Siemens and Fanuc, it is very tough for some new player to enter the market even if they have a better / cheaper product (for example, most people will continue to use MS Excel out of habit even if some other company launches a cheaper/ better spreadsheet). Other critical components like Ball screws and Linear Motion Guideways also have a limited number of global suppliers like THK / PMI. Due to this there is no particular cost advantage for anyone. The cost advantage comes from volume-based purchase as the component suppliers give significant discounts for bulk procurement.

None of these critical components are manufactured in India. Therefore, everyone has to import these components. Supply-side relationships are vital machine tools manufacturers.

How well you can integrate the components as a machine manufacturer and your machine design makes a difference to the end performance of your machine. Usually the machine housing, bed castings and some smaller components are manufactured in-house. The accuracy of the in-house manufactured components will play a major role in the quality of assembly.

• Competition:

Macpower manufactures turning centres and vertical machining centres (also called CNC Lathe and Milling Machines), where there is plenty of competition.

Bangalore based Ace Micromatic Group (AMS / Ace Designers, etc.) and Bharat Fritz Werner along with Jyoti CNC Automation Rajkot are the market leaders. In terms of technology, Laxmi Machine Works (publicly listed) and Ace Group have a reputation of being at the top, followed by BFW, Jyoti and Lokesh Machine Tools. HMT has a slight advantage in government tenders since it is a public sector unit.

Apart from the 5 names given above, Haas Automation (USA) and several Taiwanese & European brands have a sizable presence in the Indian Machine Tools market either directly or through channel partners. The pricing of Haas and Taiwanese companies is quite competitive for their quality and performance. There are large machine tools importers like Batliboi (listed), Empire Machine Tools, Electronica HiTech, Machine Tools India, Francis Klein, S&T, etc. some of whose sales figures may be comparable to Macpower.

Macpower’s machines are of fairly basic CNC technology, for which there are several small to mid-size competitors apart from the ones mentioned above (example Askar Microns). Many of the MSME buyers also purchase used imported machines, whose prices are lower than the new Indian machines.

Macpower has very little presence in high-end machine tools. Indian companies have very little to nil presence in manufacturing of components in sunrise industries like electronics, telecom gear, medical devices, etc.

Industry 4.0 adoption (IoT, AI-ML, Robotics, 3D printing) is also minimal, although there is some noise and a few demo machines in industry conferences & exhibitions.

While Macpower has progressed over the last several years, my assessment is that Macpower still needs to make significant improvements to match up to Ace Micromatic / BFW / Jyoti / LMW / Lokesh / Haas on the above parameters.

Anyone wanting to study this sector in detail should pay a visit to the week-long annual IMTEX Exhibition held in Bangalore (usually end of January), which is the largest Machine Tools Exhibition in India and also one of the largest in Asia. Several hundred Indian and Foreign OEMs put their machines on live display in running condition.

EMO in Europe is the largest Machine Tools Exhibition in the world. It is held once in 2 years and shifts between Hannover (Germany) and Milan (Italy). Even if you cannot attend it, you can go through the list of Indian exhibitors to know who has the wherewithal to be internationally competitive and global ambitions.

Disc: Not Invested.

While I agree to what members here have posted and it’s easy to conclude that EKI doesn’t have best business practices. But what I am confused about it is operating cash flows. If the projects are fraud then from where is the company getting cash flows from?

Tough to say. Abhishek Dalmia takeover of Revathi 15+yrs back had a lot of promises, but none has fructified. Most ARs seem to convey information that are not in sync with Actual info, so will base my opinion on actual past performance. Engineering Design services i.e. SEMAC, since that bought has not really grown much. Go abck 10 odd years when they purchased it and compare to last year performance. You might find more slips from the company. Need to be cautious on this one, i am not betting big on the demerger, just a tracking position.

After the merger the new entity
MEBL 3.45 cr shares Promoter holding 82 percent

Now AABL PRICE 445 CONVERSION 77.3 PRICE 560

at this rate what is the market cap approx 2000 cr

The sudden increase shown in the revenue of MEBL in the first quarter of fy23 compared to previous three years raises some concern.

Little worried about whether this is a bad corporate governance or legally valid

Some senior members kindly have a look

Regards
Disc reduced holding

All the details are in AABL website