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

The company is experiencing a good flow of new inquiries and is correspondingly doing good product development, which is converting into LoIs and pilot orders, expresses Akshay S Pitti, Vice-Chairman and Managing Director, Pitti Engineering Ltd

What is your take on Union Budget 2022? In your view, how does it fare for the capital goods sector? What are the new opportunities available for Pitti Engineering to capitalise on?    
The Indian economy remains on track to regain its position as the world's fastest-growing major economy at 9.2 per cent this fiscal.    
The growth-focussed Union Budget 2022 lays down a road map with historic allocations of Rs 7.50 lakh crore Capex for developmental projects. PM Gatishakti Master Plan, the extension of date for setting up new units to avail lower income tax benefits, focus on productivity enhancement, measures to grow the EV ecosystem, and promotion of data centres, additional orders of Vande Bharat express trains among others has laid out a path for long-term sustainable growth for the country.   
The inclusion of data centres and energy storage systems in a harmonised list of infrastructure to facilitate credit availability will increase the pace at which data centres are set up across the country. Further, including dense charging infrastructure and grid-scale battery systems in infrastructure will increase the rate of EV adoption in the country.  
A 35.4 per cent increase in capital expenditure on national highway expansion of 25,000 km is going to trigger a capital expenditure wave in cement, steel and mining sectors, which form an integral part of our end-user markets.   
We, at Pitti Engineering, are excited about various opportunities for the company to capitalise on with these announcements.  

In the recent quarter, Pitti Engineering reported a 58.68 per cent growth in net profit from Rs 7.26 crore in Q3FY21 to Rs 11.52 crore in Q3FY22. What factors have contributed the most to help you outperform?  
The company has recorded good quarterly numbers across all key performance indicators like sales, EBITDA, and PAT. Some of the factors that contributed to this outperformance are outlined below.   
The company has received an LoI for the supply of stators & rotors from two reputed customers manufacturing e-bicycles and two-wheelers in the EV space. The company has also received significant approvals for certain products from Indian Railways, having a potential for high-volume runners in the future.
We also received an LoI and sample order to supply components for power tool motors from a very well-established power tool manufacturer. The company bagged an order from Toshiba Mitsubishi-Electric Industrial Systems Corporation (TMEIC) to supply stator assemblies & complete rotor, diecast with shaft worth Rs 15 crore along with an order of Rs 15 crore for the supply of 3.4 MW wind generator stator as well as rotor assembly from Siemens Gamesa during the quarter.   
The company is experiencing a good flow of new inquiries and is correspondingly doing good product development, which is converting into LoIs and pilot orders. We are excited that these inquiries are coming from the exciting new end-user applications, including EV power tools and e-mobility.    
The global supply chain disruption due to Omicron has delayed the supply of various machines from Europe, Japan, and China, which were expected in the December quarter. We expect the same to arrive in Q4 and be available for production in Q1FY23.   

With inflation leading to a rise in input costs, what cost optimisation measures are you implementing to safeguard profit margins?     
Electric steel is the major raw material used as input material for the manufacturing of our products, which forms 75 per cent of the value of our products. Any increase or decrease in raw material cost is 100 per cent passed through to our customers, so it will not have any impact on our overall profitability of the company.  
Our plant at Aurangabad is fully-automated since its inception and has been investing Rs 270 crore as a part of our ongoing Capex plan to further optimise the labour costs as well as increase efficiency in manufacturing, which would further help in reducing manufacturing costs.  
  

Pitti Engineering has witnessed robust order inflows over the last few months. Can you share an overview of the overall order book and execution?    
We continue to see buoyant demand from all our key end-user segments. The order book & forecast as of December 31, 2021, stands at Rs 987 crore. Out of Rs 987 crore worth of order book that we have today, close to Rs 700 crore is executable over the next nine months. And the remaining is more long-term in nature, spread over the next two to three years. So, the executable order book within the next nine months will be less than 30,000 metric tonnes. As time goes by, we will be getting more orders from the customers and keep filling up the order book.