About Gala Precision Engineering Limited

Gala Precision Engineering is a precision component manufacturer of technical springs like disc & strip springs (“DSS”) including wedge lock washers; coil & spiral springs (“CSS”) and special fastening solution (“SFS”) supplying to original equipment manufacturers (“OEMs”), Tier 1 and channel partners; used in sectors like renewable energy including wind turbine and hydro power plants, various industrial sectors such as electrical, off highway equipments, infrastructure and general engineering, mobility segments such as automotive and railways. Their listed competitors include Harsha Engineers International Limited, SKF India Limited, Sundram Fasteners Limited, Rolex Rings Limited, Sterling Tools Limited and Ratnaveer Precision Engineering Limited. Their technical springs and high tensile fasteners have been supplied to customers in countries such as Germany, Denmark, China, Italy, Brazil, USA, Sweden, Switzerland etc. Accordingly, they are a key link in the global supply chain for OEMs.

The business primarily comprises of (i) springs technology division, under which we manufacture DSS including wedge lock washers (“WLW”), CSS and (ii) SFS in which we manufacture anchor bolts, studs and nuts. Their DSS products find applications in renewable energy, railways, automobiles, off highway vehicles, heavy machinery, electrical and power equipments. Their CSS products are used in commercial vehicles, passenger vehicles, railways and industrial infrastructure. They are mainly competing with Stumpp Schuele & Somappa Springs Private Limited, NHK Springs India Limited, and Muhr und Bender KG in the CSS market. Under their SFS, they manufacture make to order fasteners in the form of studs, anchor bolts and nuts which has end use applications in renewable energy, railways, off-highway vehicles, electrical and heavy machinery industries.

Over the years they have emphasised on developing manufacturing systems that comply with health and safety parameters, as well as environmental and social governance requirements. With a global clientele exceeding 175 customers, we export to over 25 countries, encompassing major markets such as Germany, Denmark, China, Italy, Brazil, USA, Sweden, Switzerland, contributing 37.53% to total sales as of March 31, 2024. Further, they are adding new customers for springs and fasteners in high potential markets such as Europe and USA.

INDIAN MANUFACTURING SECTOR OVERVIEW
The Indian manufacturing sector is a vital component of the country's economic landscape, contributing significantly to GDP growth, employment generation, and overall Industrials development. Marked by a diverse range of industries, including automobile, textiles, pharmaceuticals, electronics, and more, the sector reflects India's multifaceted Industrials prowess. Initiatives like the 'Make in India' campaign attracted foreign investment and positioned India as a global manufacturing hub. The government's strategic focus on ease of doing business, policy reforms, and the introduction of schemes such as the Production Linked Incentive (PLI) further emphasizes its commitment to nurturing a robust manufacturing ecosystem. 

With a growing emphasis on innovation, sustainability, and technological advancements, the Indian manufacturing sector is on track for dynamic growth, contributing substantially to the nation's economic resilience and competitiveness on the global stage. The overall contribution of India’s manufacturing sector to GVA was 17.31 in FY24. The absolute GVA from manufacturing has increased with a CAGR of 3.7% from FY18 to FY24.

The Index of Industrials Production (IIP) is a key economic indicator that measures the growth of various sectors in the Industrials output of a country. The primary purpose of the IIP is to assess the Industrials output and production trends in the manufacturing, mining, and electricity sectors. Post COVID-19, IIP witnessed significant growth in FY22, growing at a rate of 12%. In FY24, IIP continued its growth and rose by 5% from FY23.

The growth of Indian manufacturing sector is influenced by several factors, primarily driven by government initiatives. “Make in India”, creating a favorable environment for Industrials expansion. Global companies’ "China Plus One" strategy, which involves diversifying supply chains and considering India as an alternative manufacturing hub, makes India more attractive to companies around the world.

Indian market for Disc & Strip Springs and Wedge Lock Washers (DSS & WLW)
DSS & WLW serve as spring and fastening solutions employed in Industrials settings where mechanical devices are needed to exert force. These elements find application across diverse industries such as renewables, infrastructure, automobiles, and more. Their usage spans a range of applications, including pressure controls and regulators, vehicle braking systems, valves, and shock absorbers, tailored to the specific needs of each industry. The Indian DSS & WLW market is valued at ~ US$ 115M in FY24 witnessing a CAGR of ~6% during FY21-24. Gala Precision Engineering is a major DSS manufacturer & has ~10% market share in the Indian disc spring market as of FY24.

The Indian DSS & WLW market is expected to reach a value of ~ US$ 138M in FY27 witnessing a growth of ~6% during FY24-27P. The end-user industry growth will be the key growth driver for the DSS & WLW market. Renewable energy, automobile & infrastructure are some of the key industries showing good growth potential.

RENEWABLE INDUSTRY
India has been actively working to achieve its climate change by implementing various policies and making substantial investments (~INR 20,000 Cr). It is one of the largest countries in hydro and solar power, continually increasing its capacity through various projects. DSS & WLW play a crucial role in ensuring the structural integrity of wind energy and hydroelectricity plants. The market for DSS & WLW in the Indian renewable industry was valued at US$ 1.4M in FY24 and is expected to increase at a CAGR of ~9% during FY24-27.

The renewable energy sector is experiencing growth thanks to increased investments and policies aimed at addressing international climate change. As the demand for renewables continues to increase, there will be a corresponding rise in the consumption of DSS & WLW. Rising investment coupled with policies for achieving climate targets and cost advantage has been key driver for growth in the renewable sector.

ELECTRICAL & POWER EQUIPMENT
Due to a rising demand for power and government initiatives, the electrical equipment industry is expected to grow at a rate of ~12%. Dampening vibrations in transformers and acting as spacers between transmission lines are among the various applications of DSS & WLW as previously mentioned in the global section. The Indian DSS & WLW for electrical & power equipment market was valued at ~US$ 18M in FY24 witnessing a CAGR of ~7% during FY21-24. Gala Precision Engineering has played an active role in in the installation of the electrical infrastructure of the new India Parliament house.

The electrical and power equipment industry experiences growth from various factors. The rising domestic demand for electricity, increased investments, and government policies aiming to meet targets contribute to the expansion of the electrical and power equipment sector. This increased growth will also boost the demand for DSS & WLW, which are utilized in electrical and power equipment.

HEAVY MACHINERY
Heavy machinery refers to various equipment that enable or power the inner workings of various industries such as manufacturing, infrastructure, and HVAC. DSS & WLW play multifaceted roles in each of these industries as mentioned in global section detail. The Indian DSS & WLW market for heavy machinery industry was valued at ~ US$ 1M in FY24 witnessing a CAGR of ~7% during FY21-24.

The heavy machinery industry is set to grow strongly because of key factors. Heavy machinery is essential for steel production, and the increasing demand for steel, driven by construction and urbanization, contributes to this growth. Additionally, energy-efficient solutions for heat exchangers and the demand for HVAC systems due to urbanization further fuel this expansion. Investments in domestic infrastructure are expected to support various industries, including cement, construction equipment, and components like disc springs, both during construction and operations. Growth in steel processing industry, increase demand for elevators and Heat exchanger on account of urbanization and industrialization wil provide traction for heavy machinery industry.

MOBILITY 
Mobility, covering both railways and automobiles, relies heavily on DSS & WLW. DSS & WLW is crucial in the railway domain, applied in rolling stock and infrastructure. It also plays an integral role in 4-wheeled and 2-wheeled vehicles, notably contributing to vehicle clutch and brake mechanisms. The mobility sector has experienced significant expansion, with automobiles playing a substantial role in this development. The main contributors to this growth are proactive government initiatives such as FAME II and AMP, coupled with incentives linked to products. Additionally, the surge in investments is another key driver, leading to an escalating demand for DSS (Driver Support Systems) and WLW (Wireless Local Area Network) utilized in vital automobile components. Furthermore, government investments in railways are contributing to the increased demand for mobility.

RAILWAY INFRASTRUCTURE
The Indian railway network is among the largest in Asia and the second largest globally, operating 19,000 trains per day. As mentioned earlier in application and essentiality of global section, within the railway system DSS & WLW are primarily employed in suspension systems to stabilize rolling stock. Infrastructure elements like pull rods, compressors, traction motors, and coaches are also utilized to ensure safety during high vibrations. These components play a crucial role in maintaining the efficiency and longevity of both railways and tracks. 

Gala Precision Engineering is the first Indian company to supply WLW to Indian railways for LHB, ICF, MCF, RCF & Vande Bharat coaches. They also supply highly technical springs as import substitute used in various assemblies of metro trains, electric locomotives and other railway parts.

The market for DSS & WLW is ready to experience growth, fuelled by government initiatives, increased foreign direct investment, and investments in upgrading railway tracks and development of new trains. The market's potential for expansion is also enhanced by the growing investments in railway infrastructure and the versatility of railways in meeting various sustainable transportation demands. Government initiatives to expand railway network, upgradation of railway infrastructure and development of new train will drive growth for railway infrastructure.

Indian market for Coil & Spiral Spring (CSS)
A coil spring is a mechanical device with a helical shape, and it can be either close-wound or open-wound. Spiral springs, on the other hand, are a specific type of spring made from rectangular metal strips that are wound into a flat spiral. While coil springs store mechanical potential energy, spiral springs are designed to store and release rotational energy in the form of torque. These types of springs find applications in various areas such as automotive suspensions, electronic devices, valves, switches, machinery, and more. The effectiveness of coil and spiral springs depends on how and where they are used. The Indian CSS market is valued at ~ US$ 459M in FY24 witnessing a CAGR of ~9.8% during FY24-27P. 

Gala Precision Engineering is positioning itself as a key import substitution opportunity for European spring suppliers looking to take advantage of government schemes such as the production-linked incentives scheme. It has also entered a new related product category called retractor springs. These springs are a critical component for increasing vehicle safety.

OFF-HIGHWAY VEHICLE INDUSTRY
Off-highway vehicles refer to all types of vehicles utilized for non-transportation-related purposes such as agriculture, construction, and mining. Common uses examples are vehicles such as tractors, combine harvesters, excavators, dozers, dump trucks, etc. CSS plays a critical role in various internal components of off-highway vehicles such as the clutch to absorb shocks.

The demand for coil springs, integral for safety and proper utilization in off-highway vehicles, is driven by the growth in agriculture mechanization and the increasing need for construction equipment due to urbanization. Mechanized agriculture, government initiatives will be key driver for growth in off highway industry.

Indian market for Special Fasteners (Studs, Nuts, & Bolts)
The fastener industry in India is vital for renewable, construction, and electrical equipment. As the economy grows and Industrialization increases, there’s a rising demand for fasteners. Indian manufacturers serve both domestic and international markets, contributing to exports. Fasteners are crucial in the expanding renewable sector, and the construction boom drives the need for reliable solutions. Challenges like fluctuating raw material prices and global quality standards persist, but the industry’s resilience positions it as a key player in India’s manufacturing. 

The Indian SFS market size stands at ~US$ 6.6B as of FY24, growing at a CAGR of 18% between FY24-27. This market consists of renewables, mobility, Industrials & others.

India’s construction & mining industries are booming due to the increased investment, leading to more government support and project budgets. The renewable energy sector is also on the rise, with ambitious expansion plans, driving demand for specialized fasteners in green energy infrastructure construction.

GALA PRECISION ENGINEERING LIMITED COMPETITIVE STRENGTHS
1. Well established manufacturer of precision engineering components with diversified product portfolio and diverse market
2. Long-standing customer relationships with both Indian and global OEM and Tier 1 players
3. Well-equipped manufacturing facilities along with in-house design and other capabilities which offer scale, flexibility, and comprehensive solutions
4. Experienced management team supported by large, diverse and skilled work force
5. Track record of consistent financial growth and performance characterized by operational efficiency and high repeat business

GALA PRECISION ENGINEERING LIMITED STRATEGIES
1. Strengthening our core capabilities in precision engineering for sustainability
2. Moving up the value chain from niche markets to large addressable markets
3. Leverage in-house design and development capabilities to grow our product offerings and capitalize on future trends.
4. Strengthen relationships with our existing customers and expand customer base
5. Expand manufacturing capacity at our existing facilities and set-up additional strategically located facility

GALA PRECISION ENGINEERING LIMITED RISK FACTORS & CONCERNS
1. The Business and revenue from operations of ther Company is dependent on demand of customer's products.
2. The revenue is dependent on the springs technology segment of their business.
3. The business is dependent on the performance of the application industries with a large portion of revenue being derived from a select few of application industries.
4. They export their products to various countries including, Germany, Switzerland, Finland, Italy, Denmark, USA, China, Brazil and any adverse events affecting these countries including any exchange rate fluctuations, depreciation in the India Rupee and compliance could have an adverse impact on their business.
5. They may not be able to improve their profit margins in the future.