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ENKEI WHEELS (INDIA) LIMITED
ANNUAL REPORT 2011-2012
MANAGEMENT DISCUSSION AND ANALYSIS
(A) Review of Operations:
The Company operates into the business segment of manufacturing of aluminum
alloy castings wheels mainly used in auto industry. This year was the year
of growth.
Turnover:
During the year under review, the Company has recorded Sales of Rs. 2,792
million (net of excise duty) in current fiscal year as compared to Sales of
Rs. 2,389 million(net of excise duty) last fiscal year. A growth of 16.9%
over the last year, this growth could be achieved due to improved overall
production.
Dividend:
Company is in the initial years of growth path and in the process of
achieving break even level, your Directors have not recommended any
dividend for the current fiscal year.
Capital:
During the year under review, on 30th November, 2011 authorized share
capital of the Company was increased from Rs. 200,000,000 (Rupees Two
Hundred Millions Only) to Rs.400,000,000 (Rupees Four Hundred Millions
Only) by further creation of 40,000,000 (Forty Millions) Equity shares of
Rs. 5/- (Rupees Five only). The new equity shares shall rank pari passu
with the existing equity shares of the Company.
On 13th February, 2012 company has issued 1,233,500 Equity shares of face
value of Rs. 5/- upon the conversion of 9,251,250 Compulsory Convertible
Preference Shares (CCPS) of face value of Rs. 10/- which has been allotted
to M/s. Enkei Corporation pursuant to the scheme of the arrangement between
Alicon Castalloy Limited (Formerly known as Enkei Castalloy Limited) and
Company.
As per the scheme of arrangement, after the according approval of the
Reserve Bank of India, the promoters Enkei Corporation & Rai group have
successfully made the share exchange between themeselves and after the
share swap the share holding pattern stand as under:
* Enkei Corporation 63.22%
* Rai Group 11.77%
* Public 25.01%
Loans:
During the year under review Term Loan Facility of Rs.480,000,000/-
(Rs. Four hundred eighty millions) was sanctioned by Mizuho Corporate Bank
Ltd. and working capital facility of Rs. 100,000,000/- (Rs. One hundred
millions) was sanctioned by Axis bank Ltd..
(B) Industry Structure and Development:
The year started with an adverse effect of Japan Tsunami on the automobile
industry, especially to passenger car manufacturers. The motor cycle and
scooter manufacturers remained more or less unaffected. Though the demand
for passenger cars from the end user was there, manufacturing slowed down
due to lack of imported parts supply. This incident was then followed by
Thailand water flood. Many parts manufacturing companies got submerged by
the flood and the global supply chain was affected badly for couple of
months. These incidents also affected our order and subsequent production
throughout the year. However, the second half was the recovery time for the
Japanese automobile industries and a high demand was maintained through the
balance half of the year.
Overall, during current fiscal year, the passenger vehicle segment grew @
4.16% whereas; the two wheeler segment saw a better growth @ 14.16%.
Domestic Sales:
The growth rate recorded for Domestic Sales for 2011-12 was 12.24 percent
amounting to 17,376,624 vehicles. Though, the passenger Vehicles segment
grew at 4.16 percent during current fiscal year, and Passenger Cars grew at
2.19 percent, but Utility Vehicles showed a steady growth at a rate of
16.47 percent. In the same fashion the Multi-Purpose Vehicles grew by 13.85
percent in this period. Two Wheelers registered a growth of 14.16 percent
during current fiscal year. Mopeds, Motorcycles and Scooters grew by 11.39
percent, 12.01 percent and 24.55 percent respectively.
Exports:
During the year, overall automobile exports registered a growth rate of
25.44 percent, passenger vehicles registered growth by 14.18 percent and
two wheelers segments recorded growth of 27.13 percent.
(C) Opportunities/Outlook for the Company:
The opening up of the Indian economy has resulted in the entry of global
automobile giants. They are looking at India as a big market and as a
production base. Automobile giants like Hyundai, Fiat, Ford Motors, BMW,
Mercedez Benz, Nissan to name a few, already have their production plants
in the country.
In fact, the automobile industry is the barometer of the economic and
social transformation taking place in the country. It is one of the major
sources of employment and is likely to generate employment for thousands of
new hands directly and indirectly, in near future.
In India, automotive is one of the largest industries showing impressive
growth over the years and has been significantly making increasing
contribution to overall industrial development in the country. Presently,
India is the world's second largest manufacturer of two wheelers, it is the
fourth largest passenger car market in Asia as well as a home to the
largest motor cycle manufacturer. The installed capacity of the automobile
sector has been 9,540,000 vehicles, comprising 1,590,000 four wheelers
(including passenger cars) and 7,950,000 two and three wheelers. The sector
has shown great advances in terms of development, spread, absorption of
newer technologies and flexibility in the wake of changing business
scenario.
Considering the above situation the management of the company expects a
very good volume growth in passenger cars & two wheelers in coming years.
(D) Threats, Risks and Concern of the Management:
Rising prices in the global economy with rise in prices in steel & aluminum
putting a pressure on the cost of production. The rise in fuel prices in
India and Rupee depreciation against US dollar may affect the Indian
automobile industry badly. More over the Competition from other low cost
countries like China, Taiwan, Thailand etc. are also a threat to the Indian
automobile industry.
The management is hopeful to overcome the above situations by improving
productivity with product specialization and their ability to integrate
operations across several related areas of specialization.
(E) Expansion and Capital Expenditure:
During the year under review as a part of the expansion plan, company has
started construction of another four wheel Map line which will increase the
capacity by another 20% at the end of next financial year. Further due to
slow down of the industry, our Company has temporarily put on hold new
Paint shop facility to be constructed on newly acquired Land.
(F) Internal Control System:
The Company has an adequate system of internal controls commensurate with
its size and nature of business to ensure adequate protection of Company's
resources, efficiency of operations, check on cost structure and compliance
with the legal obligations and the Company's policies and procedures.
The Company remains committed in maintaining internal controls designed to
safeguard the efficiency of operations and security of our assets.
Accounting records are adequate for preparation of financial statements and
other financial information. Your Company has implemented ERP system for a
better internal control. The adequacy and effectiveness of internal
controls across the various functional levels, as well as compliance with
laid down systems and policies are monitored both by Company's internal
control systems and also by the Company's internal Auditors on a regular
basis. The Report of the internal Auditors is placed before the Audit
Committee, and its recommendations are implemented to further improve the
efficiency. Your Company's Statutory Auditors have, in their report,
confirmed the adequacy of the internal control procedures.
(G) Human Resource Development:
The Company is giving utmost importance to human resource development. In
this direction, the Company is providing intensive training in India and
overseas to employees of all levels for improving competence, production,
enhancing safety and social values.
To retain the skill with the company a special drive has been given towards
increasing the ratio of company and contractual labours. Achieving the high
morale and motivation is the ultimate goal of each training programme. The
management also launched the '3E' -Enkei Evolving Education system and
thereby ensuring a framed training to all employees
The management expects to continue the customized development program of
employees during the current year also. The management of the Company
enjoys cordial relations with its employees at all levels. The Board of
Directors wish to place on record its highest appreciation of the
contribution being made by all the employees.
(H) Cautionary Statement:
Statements in Management Discussion and Analysis Report describing the
Company's objectives, projections, estimates and expectation may be
'forward looking' within the meaning of applicable laws and regulations.
Actual results might differ materially from those expressed or implied.
Risk Management:
The management is accountable for the integration of risk management
practice into the day to-day activities. The risk assessment and
minimization procedures being followed by the management and steps taken by
it to mitigate these risks are periodically placed before the Board and
Audit Committee along with findings of the internal auditors. All the
assets of the Company are adequately insured.
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ENKEI WHEELS (INDIA) LIMITED
ANNUAL REPORT 2010-2011
MANAGEMENT DISCUSSION AND ANALYSIS
(A) Review of Operations:
The Company operates into only one business segment viz. manufacturing of
aluminum alloy castings wheels mainly used in auto industry. This was our
first year in operation after demerger from M/s. Alicon Castalloy Ltd
(Formerly known as M/s. Enkei Castalloys Ltd.)
During the first year Company has recorded an impressive performance.
During the year under review, the Company achieved (Met Sales of Rs
2,389.24 million as compared to Rs. 1,666.99 million and incurred a Profit
of Rs2.71 million during current fiscal year as compared to Loss of Rs.
93.99 million during last fiscal year. The Company has increased its sales
by 43% as compared to the last fiscal year and for the first time company
made some marginal profit after tax.
(B) Industry Structure and Development:
The economy boom in both manufacturing and service industry continued in
the year under review. The robust growth of Indian economy has further
fuelled the automotive industry. This growth is recorded in adverse
atmosphere of high fuel price and increased interest rate. The vehicle
prices have also gone-up except in case of small segment cars, due to the
increase in basic raw material cost. The projected CAGR for 2005-2014 is 17
% (Source ACMA).
The cumulative production data for April-March 2011 shows production growth
of 27.45 percent over same period last year. In March 2011 as compared to
March 2010, production grew at 20.62 percent. The industry produced
17,916,035 million vehicles of which share of two wheelers, passenger
vehicles, three wheelers and commercial vehicles were 75 percent, 17
percent, 4 percent and 4 percent respectively.
Domestic Sales
The growth rate recorded for Domestic Sales for 2010-11 was 26.17 percent
amounting to 15,513,156 vehicles. However, the month of March 2011
registered a lower growth rate of 19.42 percent as compared to the
cumulative data of 2010-11.
Passenger Vehicles segment grew at 29.16 percent during April-March 2011
over same period last year. Passenger Cars grew by 29.73 percent, Utility
Vehicles grew by 18.87 percent and Multi-Purpose Vehicles grew by 42.10
percent in this period. In March 2011 figures for domestic sales of
Passenger Cars show a growth of 24.37 percent over the same month last year
which is lower than 2010-11 growth. Also, sales of total passenger vehicle
in the month of March 2011 at 23.13 percent (as compared to March 2010)
were lower than growth rate of 2010-11.
The overall Commercial Vehicles segment registered growth of 26.97 percent
during April-March 2011 as compared to the same period last year. While
Medium & Heavy Commercial Vehicles (M&HCVs) registered growth of 31.78
percent, Light Commercial Vehicles grew at 22.88 percent. However, the sale
in the month of March 2011 over March 2010 was substantially lower with
growth of only 15 percent.
Three Wheelers sales recorded a growth rate of 19.44 percent in April-March
2011. While Passenger Carriers grew by 22.03 percent during April-March
2011, Goods Carriers registered growth of 9.45 percent.
Two Wheelers registered a growth of 25.82 percent during April-March 2011.
Mopeds, Motorcycles and Scooters grew by 23.53 percent, 22.86 percent and
41.79 percent respectively.
If we compare March 2011 to March 2010, the growth figures for three and
two wheelers are also lower at 14.36 percent and 19.14 percent
respectively.
Exports
During April-March 2011, overall automobile exports registered a growth
rate of 29.64 percent. Passenger Vehicles registered marginal growth at
1.64 percent in this period. Commercial Vehicles, Three Wheelers and Two
Wheelers segments recorded growth of 69.51 percent, 55.86 percent and 35.04
percent respectively during April-March 2011.
In March 2011 compared to March 2010, overall automobile exports registered
a lower growth of 19.64 percent
An ACMA-McKinsey study indicates a growing outsourcing opportunity for the
Indian auto-components sector. India is likely to attain 3-4% share of the
US $ 700 billion potential market by 2015, translating into a US $ 20-25
billion opportunity by 2015, a 30% CAGR over the next 10 years from US$ 1.4
billion in 2005 (McKinsey estimates).
(C) Opportunities/Outlook for the Company:
India is being turned into a hub for small car manufacturing. All the major
car manufacturers have announced capacity expansion and are continuously
introducing new models. Many new international giants have already set up
their manufacturing facilities in India. Government's focus on developing
roads and other infrastructure facilities provide ample growth
opportunities. Robust growth of economy backed by strong performance of all
key industrial sectors shall result in increased purchasing power of
masses.
This will also mitigate the adverse effect price increase. In recent years
we have seen increasing number of global players entering Indian market by
way of Joint ventures, collaborations or wholly owned subsidiary. Sudden
interest of major global players has made Indian auto industry very
competitive as India provides twin benefit of ready market and Low cost
manufacturing base for them.
Car stock per 1000 population which currently around 8 is expected to
increase to three fold by 2020. New passenger car registration is expected
to grow at a CAGR of 11.41% during the forecasted period.
Keeping all these factors into consideration, the management of the Company
expects a very good volume growth in passenger cars segments in coming
years. This will result in increased demand for the Company's Alloy wheels
but the cheap imports from China of aluminum wheel are cause of concern for
management. Though the quality of our wheel is well accepted by the
customers, the cheap import from China is adversely affecting the demand
and profit margin.
(D) Threats, Risks and Concern of the Management:
The cyclical nature of the Indian automobile industry might affect demand.
Given the fact that Indian economy has set its path on growth coming after
the global economic and financial crisis we perceive inflationary scenario
in the future. Government policies to contain the same may result into rise
in interest rates thus increasing the cost of funds. Restriction in money
supply is likely to cause lower off take of automobiles which would affect
its domestic sales.
The rise in crude oil prices not in tandem with purchasing power may
further result in deferment of purchase decisions by end customers thus
reducing the demand for automobiles and finally affect the operations of
auto component manufacturing companies.
Also, the increase in raw material cost for wheels aggregates might not be
fully compensated by the customers. The Company plans to mitigate this risk
through cost reduction initiatives such as value engineering and hedging.
The company imports raw materials and components and on a need basis,
imports capital equipments. The company has significant long term
borrowings in foreign currency and business transaction in various other
countries. This exposes the company to significant foreign exchange
fluctuation risk.
Further Tsunami hit Japan on 11th March 2011 in the north-east prefecture.
Post the tsunami-earthquake, which hit Japan, there has been a component
shortage. On account of which many makers who import parts from Japan have
announced production cuts in their Indian subsidiaries for the first
quarter of year 2011-12.
However, the future Indian market (2011 - 2012) seems to be stable with a
likely expected growth of 15-18%. However this is mainly based on the
finance conditions in the coming months.
(E) Expansion and Capital Expenditure:
During the year under review company has commissioned Map-3 and re-located
the Map-1 line from M/s. ALICON CASTALLOY Ltd. Premises to the Company
premises and is commissioned in the month of April'2011. Further Our
Company has acquired the Land adjacent to our premises admeasuring approx
9.12 acres for setting up new Paint Shop and Map Lines. To keep the pace
with the grow market and increased demand the company has got a massive
expansion plan for the coming years
(F) Internal Control System:
The Company has an adequate system of internal controls commensurate with
its size and nature of business to ensure adequate protection of Company's
resources, efficiency of operations, check on cost structure and compliance
with the legal obligations and the Company's policies and procedures.
The Company remains committed to maintaining internal controls designed to
safeguard the efficiency of operations and security of our assets.
Accounting records are adequate for preparation of financial statements and
other financial information. Your
Company has implemented ERP system for a better internal control. The
adequacy and effectiveness of internal controls across the various
functional levels, as well as compliance with laid down systems and
policies are monitored both by Company's internal control systems and also
by the Company's internal Auditors on a regular basis. The Report of the
internal Auditors is placed before the Audit Committee, and its
recommendations are implemented to further improve the efficiency. Your
Company's Statutory Auditors have, in their report, confirmed the adequacy
of the internal control procedures.
(G) Human Resource Development:
The Company is giving utmost importance to human resource development. In
this direction, the Company is providing intensive training in India and
overseas to employees of all levels for improving competence, production,
enhancing safety and social values.
To retain the skill with the company a special drive has been given towards
increasing the ratio of company and contractual labours. Achieving the high
morale and motivation is the ultimate goal of each training programme. The
management also launched the '3E'-Enkei Evolving Education system and
thereby ensuring a framed training to all employees
The management expects to continue the customized development program of
employees during the current year also. The management of the Company
enjoys cordial relations with its employees at all levels. The Board of
Directors wish to place on record its highest appreciation of the
contribution being made by all the employees.
(H) Cautionary Statement:
Statements in Management Discussion and Analysis Report describing the
Company's objectives, projections, estimates and expectation may be
'forward looking' within the meaning of applicable laws and regulations.
Actual results might differ materially from those expressed or implied.
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ENKEI WHEELS (INDIA) LIMITED
ANNUAL REPORT 2009-2010
MANAGEMENT DISCUSSION AND ANALYSIS
(A) Industry Structure and Development:
The Indian auto component industry is one of the emerging industries in
India having excellent growth potential. The industry which initially began
with providing components to the domestic market alone now has established
itself as one of the major auto components hub in Asia and has become a
significant player on the global platform too. Oiginal Equipment
Manufacturers (OEM)market account for 2/3rd of the total auto component
industry(IBEF Report). The industry which reported a turnover of $19.1
billion in 2008-09, is expected to touch a top line of US$ 40 billion by
2015-16 as reported by Automotive Component Manufacturers Association of
India (ACMA) in its Vision 2015 Report. This makes the Compounded Annual
Growth Rate (CAGR) of the auto component industry at 11 per cent for 2008-
15. Exports by the Indian auto component industry touched US$3.82 billion
in 2008-09. With the Association of South East Asian Nations (ASEAN) Free
Trade Agreement (FTA) coming into effect auto component exports are likely
to gain momentum in the future.
(B) Review of Operations:
The Company acquired the Wheel Business of Enkei Castalloy Limited (ECL)
pursuant to the Scheme of Arrangement between Enkei Castalloy Limited and
the Company. The results discussed below refer to the Wheel Business of ECL
only. The Company achieved Sales of Rs.1,666.99 millions and incurred a
loss of Rs.93.99 millions during the period ended 31st March 2010. As this
is the First year of Operation, the comparable figures of Last year are not
Applicable.
(C) Opportunities/Outlook for the Company:
In Financial Year 2010 both two wheeler and four wheeler industry had
growth of in excess of 25%. Indian Economy is on a growing path and likely
to grow at a pace of at least 7.5% in Financial Year 2011 and may be at
higher rate in subsequent years. With this both two wheeler and four
wheeler industry will have double digit growth even in coming years.
Further introduction of high end mopeds will increase use of alloy wheels
even at the faster rate. Considering positive micro and macro factors, and
willingness to fund expansion program by the promoter, outlooks for the
company is positive.
(D) Expansion and Capital Expenditure:
The Company during the period ended 31st March'2010 has restarted MAP-1 and
also constructed ETP/STP. The Entire expansion was funded from internal
accruals and term loans.
(E)
Threats, Risks and Concern of the Management:
The cyclical nature of the Indian automobile industry might affect demand.
Given the fact that Indian economy has set its path on growth coming after
the global economic and financial crisis we perceive inflationary scenario
in the future. Government policies to contain the same may result into rise
in interest rates thus increasing the cost of funds. Restriction in money
supply is likely to cause lower off take of automobiles which would affect
its domestic sales.
The rise in crude oil prices not in tandem with purchasing power may
further result in deferment of purchase decisions by end customers thus
reducing the demand for automobiles and finally affect the operations of
auto component manufacturing companies.
Also, the increase in raw material cost for wheels aggregates might not be
fully compensated by the customers. The Company plans to mitigate this risk
through cost reduction initiatives such as value engineering and hedging.
The company imports raw materials and components and on a need basis,
imports capital equipments. The company has significant long term
borrowings in foreign currency and business transaction in various other
countries. This exposes the company to significant foreign exchange
fluctuation risk.
(F) Internal Control System:
The Company has an adequate system of internal controls commensurate with
its size and nature of business to ensure adequate protection of Company's
resources, efficiency of operations, check on cost structure and compliance
with the legal obligations and the Company's policies and procedures.
The Company remains committed to maintaining internal controls designed to
safeguard the efficiency of operations and security of our assets.
Accounting records are adequate for preparation of financial statements and
other financial information. The adequacy and effectiveness of internal
controls across the various functional levels, as well as compliance with
laid down systems and policies are monitored both by Company's internal
control systems on a regular basis. Your Company's Statutory Auditors have,
in their report, confirmed the adequacy of the internal control procedures.
(G) Human Resource Development:
The Company is giving utmost importance to human resource development. In
this direction, the Company is providing intensive training in India and
overseas to employees of all levels for improving competence, production,
enhancing safety and social values. Achieving high morale and motivation is
the ultimate goal of each training program. The management expects to
continue the customized development program of employees during the current
year also. The management of the Company enjoys cordial relations with its
employees at all levels. The Board of Directors wish to place on record its
highest appreciation of the contribution being made by all the employees.
(H) Cautionary Statement:
Statements in Management Discussion and Analysis Report describing the
Company's objectives, projections, estimates and expectation may be
'forward looking' within the meaning of applicable laws and regulations.
Actual results might differ materially from those expressed or implied.
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