Precision Camshafts Limited (PCL), a leading manufacturer of camshafts, has announced plans to initiate insolvency proceedings for its German subsidiary, MFT Motoren und Fahrzeugtechnik GmbH (MFT). The company is seeking shareholder approval through a postal ballot for this significant corporate action.

Financial Distress Prompts Insolvency Move

MFT, a material step-down subsidiary of PCL, has been facing persistent financial difficulties. The economic slowdown in Europe has severely impacted MFT's business outlook, with significantly reduced customer call-offs from prominent clients. This has resulted in an immediate and severe impact on the company's cash flows, particularly from June to August.

Shareholder Approval Sought

PCL has issued a postal ballot notice to seek shareholder approval for disposing of its 100% shareholding in MFT by initiating insolvency proceedings. This move is in accordance with Regulation 24(5) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which requires a special resolution for such actions involving material subsidiaries.

E-Voting Details

Shareholders can cast their votes electronically from September 16 to October 15. The results of the postal ballot will be announced on or before October 17.

Implications of Insolvency

Upon completion of the insolvency and liquidation process, MFT will cease to exist and will no longer be a subsidiary of Precision Camshafts Limited. This decision comes as MFT faces acute liquidity constraints, making it unable to sustain operations.

Management's Perspective

Yatin S. Shah, Chairman and Managing Director of Precision Camshafts Limited, stated in the notice, "The Board recommends passing of the Special Resolution to authorize the initiation of insolvency proceedings for MFT under prevailing German laws, given the subsidiary's inability to meet its obligations due to the current economic climate."

Next Steps

If approved, the Board of Directors will be authorized to:

1. Initiate insolvency proceedings for MFT under German law
2. Appoint an insolvency professional in Germany to carry out the process
3. Acknowledge the cessation of control over MFT upon completion of insolvency/liquidation
4. Undertake necessary filings, disclosures, and actions in compliance with Indian and foreign laws

The move underscores the challenges faced by international subsidiaries in the current global economic environment and PCL's strategic decision to address these issues through legal proceedings.

Precision Camshafts Limited (PCL), a leading automotive component manufacturer, has reported a robust financial performance for the quarter, showcasing resilience in the face of global market challenges. The company's consolidated total income reached Rs. 221.00 crores, marking a 10.70% quarter-on-quarter increase, while its standalone business income grew by 11.20% to Rs. 164.00 crores.

Financial Highlights

Mixed Performance Across Subsidiaries

While PCL's domestic operations showed strong growth, its European subsidiaries faced significant challenges:

• MEMCO: Reported revenue of Rs. 13.00 crores, showing growth from existing customers and adding 2-3 new customers.
• MFT (European subsidiary): Experienced critical liquidity issues due to a 30% drop in customer demand and sudden volume drops of 20-30% from European customers.
• EMOSS (e-mobility subsidiary in Netherlands): Faced reduced customer forecasts, with revenue of approximately Rs. 16.00 crores.

E-Mobility Initiatives

PCL's e-mobility efforts showed mixed results:

• Received new orders for diesel to electric vehicle conversions in India, particularly in cities like Pune and Nagpur.
• The electric heavy commercial vehicle business is progressing as planned, with the first vehicles expected to be ready by the end of the calendar year.
• Projected contribution to revenues from the electric heavy commercial vehicle business is expected from FY'27.

Future Outlook

Despite challenges in the European market, PCL remains optimistic about its growth prospects:

• New business acquired from customers in India and overseas is expected to start production by mid-2026.
• The company continues to focus on cost control and operational efficiency to maintain profitability.
• E-mobility initiatives in India are showing promise, with potential for significant growth in the coming years.

Karan Shah, Whole Time Director, Business Development at Precision Camshafts Limited, commented on the results during the earnings call, stating, "While Europe remains a challenging geography to operate in, business in India is growing strongly and offsetting this impact."

As PCL navigates through global market dynamics, its strong domestic performance and strategic initiatives in e-mobility position the company for potential growth in the coming quarters. Investors and stakeholders will be keenly watching how the company manages its European operations while capitalizing on opportunities in the Indian market and the emerging e-mobility sector.