Usha Martin – Coming out of the Chaos

My notes from Usha Martin Limited- Annual Report 2022-23

• One of our main focus areas would be to produce high-value products.

• Target to achieve top-line CAGR of ~15% & Operating EBITDA margins of ~18% over the next 2-3 years.

• To support this, we planned a capex of Rs. 310 crores during FY22 and Rs. 167 crores proposed during FY24. Our objectives include expanding our capacities, modernising our existing production facilities to improve productivity and reduce the cost to serve, enhancing our R&D and testing facilities, improving our plant infrastructure, and digitalizing our operations.

• The increased capacities would primarily focus on value-added products such as

• • mining ropes,
• • non- rotating ropes,
• • compacted ropes and
• • plasticated ropes, etc.

• We plan to fund most of the capex through internal accruals, with about 20-25% through debt, and our focus is on achieving asset turns of 2-3x over the next two years at optimal utilz levels.

• We have successfully expanded our business by diversifying into various geographies and sectors. This has helped us reduce our dependence on a single product or market and enabled
  us to sustain growth and profitability. International business have recorded
  a substantial growth in revenue, and made up 55% of our FY 2022-23 revenue. Revenue from international operations recorded a substantial increase of 34% in FY 2022-23 over the previous year.

• Our growth is supported by both macro-economic and internal factors. Macro-economic factors, such as growth in the oil & gas and renewable energy sectors, specifically offshore wind, continue to strengthen our performance.

Key growth segments include:

• Mining
• Energy
• Elevator
• fishing
• Ports

The Indian economy however showed remarkable resilience through these tough times
due to its strong fundamentals. Development in sectors like -

• oil & gas,
• port and
• mining
  have resulted in demand for the Company’s specialized products such as large-diameter ropes, port crane ropes and mining ropes.

Volumes:

Subsidiaries of Usha martin - Sales and PAT

Opportunities

• Growth in oil & gas and renewable energy sectors specifically offshore wind projects.
• Opportunities in Latin America mining sector is expected to augment exports.
• Strong activity level in shipping and container terminals − Supply chain disruptions and higher cost structures faced by global competitors
• Revival in automotive sector and government policies for the development of infrastructure projects and thrust on “Make in India” will boost demand for the Company’s specialty products.

Threats, Risks & Concerns

• Slowdown of major economies might impact growth plans of the Company.
• Tightening of interest rate regimes by central banks of major economies may continue to be a deterrent factor.
• Inability to pass-off the effect of adverse movement of prices of key input materials and rising freight costs.
• Geo-political tension in Eastern Europe might adversely affect supply-chain and receivables.
• Re-emergence of Covid may dampen business and operations.

Outlook
Government spending in infrastructural and social welfare projects such as roads, railways, water, and sanitation along with an expected revival in the auto sector will give an impetus to the demand of specialty products of the Company. With a renewed focus on specialty wire-rope business and strategic initiatives to consolidate leadership, the Company is undergoing a strategic transformation.

A couple of key points from MD’s commentary:

• They plan on closer integration of the overseas subsidiaries with the India business for Synergies.
• Focused on our services business internationally to add further value to our products and increase market share.
• We created a Global Growth Centre in Europe to increase our geographical spread and grow our share in strategic markets in which we have limited presence.

They have added a nice visual subsidiary chart, reproducing as-is for quick reference.

and