Machine tools

Industry Code (as per CMIE Prowess): 0101014001150000'

June 2022

Individual Parameters Contributing to the Score

Moderate Over Supply

Capacity utilization (CU) across the industries in FY21 remained low (close to 70%) due to subdued economic activity. As per OBICUS survey of RBI, the capacity utilisation was at 63.3% for Q2FY21 & 66.6% for Q3FY21 but has marginally improved in FY22 from 68.3% for Q2FY22 to 72.4% for Q3FY22. As per CMIE data, the industry reported a y-o-y 30.4% decline in sales from Rs.11.2 billion in March 2021 quarter to Rs.7.5 billion during the quarter ended March 2022. On the contrary, the industry exports witnessed a sharp spike of 52.71% from Rs.24 billion in FY21 to Rs.36.85 billion in FY22. The demand for machine tools will depend on the recovery of the capex cycle over the medium term.

Fragmented Industry

Lower demand has intensified competition in the industry along with substantial imports from countries such as China.

Stable Regulatory environment

The government is encouraging FDI investments in the machine tools sector to reduce the dependence on imports.

Largely predictable supply of inputs from diversified sources or Raw Materials with rare, occasional disruptions / fairly predictable price band

Rising steel and other metal prices can escalate input cost for this industry. The volatility in the currency is also a challenge for the players who either source components through imports or engage in exports.