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Published: Nov 15, 2022
Updated: Nov 15, 2022

Dynamatic Technologies

Cutting edge of weapons design

Incorporated in 1973, Dynamatic Technologies (DTL) – a Bangalore-headquartered NSE-BSE listed company — is primarily engaged in design and building of highly engineered products broadly attributed to automotive, aeronautic, hydraulic and security applications.

To its major credit, in addition to ongoing activities in its aerospace division, DTL has started producing exacting airframe structures and precision aerospace components for the wings and the rear fuselage for ‘Lakshya’, India’s pilotless target aircraft, and ailerons and wing flaps for the HJT36 ‘Intermediate Jet Trainer’.

It’s worth mentioning that this is for the first time such capabilities have been developed in the Indian private sector and the aerospace division of DTL is now taking up development of another major airframe structure for the ‘Sukhoi 30 MKI’ fighter bomber.

Likewise, the company also produces the hydraulic transmission system for India’s T-72 battle tanks, including hydraulic pumps, hydraulic transmission couplings and distribution mechanisms. Further, DTL has also designed the steering control system, turret control system and braking system for the ‘Arjun’ Main Battle Tank.

The company has been informed recently by Tamil Nadu Industrial Development Corporation (TIDCO) with regard to necessary land clearances given to DTL for setting up an aerospace and defence industrial park. TIDCO has indicated that the process of acquisition and development of such a park would be completed shortly. Simultaneously, the company is pursuing disposal of its wind farm land towards the proposed southern defence industrial corridor.

AIRBUS TIES

Sharing other exciting developmetns, Mr Malhoutra said, “Dynamatic recently won the contract to manufacture ‘escape hatch doors’ for Airbus A220 aircraft. This contract marks a milestone in Airbus’ Indian supply chain and extends DTL’s capabilities for manufacturing fuselage aerostructures to Airbus beyond wing movables.” He added, “Out of 12,000 suppliers, Airbus chose DTL and honoured us with the Airbus Global Sustainability Award 2021.”

DTL has design, engineering and manufacturing facilities in the UK, the US, Germany and India. Being vertically integrated, the company has its own alloy-making and casting capabilities supported with its captive green energy sources.

With three design laboratories in India and Europe, DTL is a leading private research & development organization, with numerous inventions and patents to its credit. The company and its subsidiaries employ around 50 scientists and 500 engineers with expertise in mechanical engineering, advanced computer aided engineering, materials & metallurgical engineering, fluid dynamics and defence & aerospace research.

In hydraulic gear pumps, the company is Asia’s largest producer and amongst the top five worldwide. It has a stateof-the-art design centre capable of total product and system design, with advanced capabilities in structural, thermal and dynamic engineering for analysis, design validation and optimization. Around 34% of the agricultural tractors produced worldwide are fitted with DTL’s hydraulic gear pumps. Whereas, in India, over 85% of all agricultral tractors and construction equipments together produced are powered by Dynamatic hydraulics.

IN CARS TOO

JKM Dae Rim Automotive (JDAL), located at Chennai, is a subsidiary of DTL which manufactures automotive components for Hyundai Motors India, Tata Motors and Fiat India, importantly on a single- source basis. Almost 50% of all passenger cars made in India are built using critical engine and transmission products manufactured by JDAL.

At its two domestic foundries located at Bangalore and Chennai, DTL produces high quality non-ferrous alloy and castings for industrial, automotive and aerospace applications using the latest metallurgical technologies. Its world-class German foundry at Erla is being re-configured to produce metallurgical products for aircraft. This facility has successfully qualified for aerospace standards early this year.

A road map is already built to pivot this German foundry to manufacture higher value-added aerospace grade metallurgical products over the next few years. However, the Russian invasion of Ukraine has completely changed the dynamics due to massive disruption in raw material availability and a 400% rise in power costs. This development has brought huge risk and turbulence to the foundry.

Pursuant to an internal restructuring approved by the board, the company has entered into an agreement with Eisenwerk Erla GmBH (EEG), a step-down wholly owned subsidiary of the company, to purchase an equity stake of 24.62% held by EEG in Dynamatic Manufacturing, another subsidiary of the company. The subject transaction will be completed upon completion of requisite procedural formalities.

AEROTROPOLIS

In 2015, DTL established a manufacturing plant adjacent to the Bangalore International Airport. Now, the company is expanding it by 60,000 sq ft and will have 2,40,000 sq ft available by the end of this year. The company also has ambitious plans to add another one million sq ft to this facility to cater exclusively to new orders. This also impliedly reveals that DTL owns relatively large land areas at prime locations. The aerospace manufacturing and engineering facilities located right next to the runway augurs well for DTL to address huge growth opportunities.

UAVs WITH ISRAEL

DTL has partnered with Israel Aerospace Industries (IAI) for UAVs in India. The company has entered into a tripartite agreement which includes IAI-HAL-DTL for manufacture, sales and service of large UAVs to cater to the requirements of the Indian defence forces and CAPF.

IAI has been a reliable partner of the Indian MoD for over two decades and today is a world leader in UAVs with over 14,00,000 cumulative operational flight hours. Indian Military is effectively using Herons and Searcher UAVs from IAI in surveillance missions.

Herons have been able to fly in a dual role and thereby fly at ranges of 400 km and an extended range of 1,000 km using Satcom. More importantly Herons can operate at altitudes of 30,000 feet and are the best platforms for surveillance and reconnaissance missions at high altitude and hilly terrains. With a big shift in government’s liberalization policy, this particular vertical holds a lot more potential going forward and could provide a new dimension and considerable benefit to DTL.

GOOD CASH FLOW

The company’s financial performance for the first six months in the current fiscal year has shown good improvements in profitability, despite revenue remaining almost flat at the last year’s level.

On a tiny equity capital of Rs 6.34 crore, the EPS during the first six months has gone up to Rs 28.72 (PY Rs. 14.23) and the book value to Rs 601.59 on a Rs 10 face value. The promoter group holds a 44.84% equity stake while the remining 55.16% is spread among 14,603 public shareholders.

DTL had total borrowings of Rs 571 crore on Sept 30, 2022 against Rs 543.47 crore as of March 31 this year. As a result, its corresponding finance cost has marginally increased from Rs 28.86 crore (H1 FY22) to Rs 31.30 crore during the first half this year.

Commenting on the company’s cash flow management, Mr Malhoutra said, “Our high precision hydraulic gear pump business is both IP-rich and also enjoys economies of scale. Moreover, we have developed a large number of complimentary hydraulic systems and elements to increase our share of customers’ wallet. Granular cash flow in this business enables us to manage uneven cash flow from aerospace customers.” He added, “With a resumption of travel across the world, we are beginning to see demand from commercial aviation once again, therefore necessitating an increase in production.”

NICHE DOMAIN

These details lead us in concluding that DTL operates in a multi-disciplinary specialized precision engineering domain having high entry barriers. Moreover, the company has developed ultra hi-tech skills and full-fledged multi-location integrated facilities, supported with all required accreditations and certifications.

More importantly, the government’s paradigm shift in policy for the aerospace and defence sector under ‘Make in India’ and ‘Atmanirbhar Bharat’ in general and the offset clause in particular has opened up a plethora of new opportunities, especially for domestic established players in the field with sound domain knowledge and due capabilities.

DTL not only meets these criteria but also travels an extra mile because since the last couple of decades, the company has been successfully working with most of these multinational OEMs in the field and has earned high credentials.

Revealing the bright prospects for the aerospace and defence division of the company, Mr Malhoutra said, “From the mid-90’s DTL has been a R&D/manufacturing partner of DRDO and HAL. During the past decade, we have successfully built a world-class tier-1 business supplying flight-critical aerostructures to Airbus, Boeing and Bell Helicopter. Our demonstrated capabilities and delivery performance have positioned us for greater growth as aircraft manufacturers consolidate their supply chains in a post-Covid world.”

INDIA CALLING

India being a very important, strategic and inevitable market for these defence OEMs, gradually most of them have started expanding here and looking towards having a capable and preferred local partner. DTL enjoys good partnerships with Airbus, Boeing, Bell, IAI and Dassault as well as locally with HAL, DRDO etc., to mention a few. Hence, this could turn out as a bright opportunity for the company. In the process, using its engineering excellence, DTL needs to optimize its current capacity utilization and further scale up its operations in the line with the demand scenario. This would accelerate and translate into its robust growth journey hereon.