Client Overview

When we partnered with this manufacturing and industrial components company, volumes were growing, but financial pressure was steadily increasing:

  • Annual revenue of ₹40+ Crores
  • Supplier to large OEMs and Tier-1 manufacturers
  • Product mix of high-precision, repeat-order components
  • Team of 90+ employees across production, QA, and operations
  • Heavy dependence on long-term OEM contracts

Despite consistent orders, profitability was becoming harder to sustain.

The Challenge

Rigid contracts and price reductions driven by original equipment manufacturers (OEMs) posed the most obstacle. Customers enforced annual price-down clauses (3–5%), while growing input costs (steel, power, tooling, and compliance) were unrecoverable, causing margin erosion over time.

The business was unclear about warranty expenses and tooling amortization. Profitability was distorted because tooling investments were paid for up front rather than over the course of the contract. Penalties and warranty rejections were recorded after the event and had nothing to do with product-specific profits.

Long receivable cycles (75–90 days) and frequent debit notes raised by OEMs using EDI systems increased working capital stress. Cash was further blocked by the delay of GST refunds and export incentives. Pricing negotiations and bank conversations were weak since financial data was available but not decision-ready.

The Solution

At Sharda Associates, we focused on margin protection and financial control.

  • Implemented part-wise costing including tooling, warranty, and rejection costs
  • Structured tooling amortization and contract-level margin tracking
  • Built dashboards for price-down impact, OEM penalties, and recoveries
  • Strengthened working capital planning and export/GST refund tracking

We also worked closely with management on OEM renegotiation support, cost pass-through analysis, and bank-ready financial reporting.

The Impact

  • Net margins stabilized and improved by 14%
  • Tooling cost visibility improved by 100%
  • Working capital blockage reduced by 28%
  • OEM negotiations strengthened, reducing penalties

Conclusion

By bringing cost transparency and contract-level discipline, we helped the company move from silent margin erosion to controlled, data-backed profitability.

If your industrial components business is under OEM pressure and margin stress, Sharda Associates’ Virtual CFO services can help you regain control and scale sustainably.