Kinetic Engineering records profit in auto systems business

Kinetic Engineering is celebrating its 50^th anniversary with good news for the company and shareholders alike – two quarters of consecutive profits.

The company has completed its restructuring with renewed commitment to its mission to consistently provide excellence by working aggressively on all fronts to reduce costs and improve margins.

Ajinkya Firodia, MD, Kinetic Engineering Limited said, “I am proud to announce that our restructuring and business focus is finally complete. It has been a decade of effort of all our team members that involved debt restructuring, layout changes, quality systems up-gradation, customer hunting, backward integration and finally, turning the tide. It is fortunate and coincidental that it coincides with our 50-year anniversary – and hence is a reward of sorts for our shareholders who continue to believe in us. We also plan to felicitate the employees who have stood by the company through the years and have been an integral part of this success.”

KEL currently produces various kinds of transmission products for cars, buses, trucks, tractors, and other general engineering applications. It also makes complete gearboxes for commercial vehicles and has also devised its own electric axle application. Its customer base includes prestigious names such as M&M, TATA, Ashok Leyland, Carraro, Renault Nissan, American axle, and many others. Using best practices in the auto industry, the company delivers high-quality systems and components at competitive prices to the customers. Leveraging its technical strength by investing in constant innovative up-gradation, the company has recently won new business from International Tractors, Sonalika and expects to start supplies soon.

Equipped with large infrastructure and engineering and manufacturing knowledge, the Firodia Group decided to change its business model to auto-systems. This task was undertaken in 2009 – 2010 by then, new entrant, Ajinkya Firodia. After a decade of resilience and persistence, the company this year has turned the corner – by reporting EBITDA, Cash and even Net Profit for 2 consecutive quarters.

Having invested heavily in various projects such as new machines and set up a dedicated shop for various projects, Kinetic went through many ups and downs in the process and also learned a lot. The company sharpened its focus on transmission products such as gears, shafts, and gearboxes and also went in for backward integration to manufacture their own forgings to reduce its material costs from 78% to 50%. It also has managed to rationalize through efficiency improvements the employee costs from 28% to 16% over the years; and trimmed nearly 140 crores of external debt from its books.

Despite the challenges posed by the pandemic situation, with diligence and hard work, the strategy finally started paying off which is reflected in the company starting to earn cash profits as the first step and now to earn net profits. The company reported an EBITDA of Rs 459 L in Q4 2021 and a cash profit of Rs 293 L, net profit of Rs 129 L, and in Q1 2022 it reported EBITDA of Rs 357 L, cash profit of Rs 192 L and a net profit of Rs 20 L despite the slowdown due to Covid. Kinetic Engineering Limited began its fantastic journey as a moped manufacturing company in 1970,

with its life-changing product the Kinetic Luna moped. “Chal Meri Luna'' was a groundbreaking success, providing affordable transportation to the common man in India. The Kinetic Luna sold over 80 lakh mopeds in the 80’s and 90’s; parent company, Kinetic Engineering Limited, built almost the entire vehicle by itself at its 50-acre plant in Ahmednagar. The innovations at Kinetic continued across the various models for the moped – Safari, Spark, Wings, King; motorcycles such as Boss, Velocity and GF to name a few.

As competition in 2-wheelers intensified and the market turned its preference towards motorcycles, Kinetic Engineering Limited took a strategic decision to sell its 2-wheeler business to its Pithampur Company, Kinetic Motor Company Limited; which in turn partnered with the Mahindras.