MANAGEMENT DISCUSSION AND ANALYSIS REPORTOVERVIEW
India has taken numerous steps through the implementation of a broad-basedcounter-cyclic policy package to respond to the negative fallout of the global slowdown.Amidst all the havoc of the financial crisis of the past two years, it looks like Indiahas a 'sun-rise' sector to bet on! The Automobile sector is moving into top-gear.
Over the past twenty five years i.e. from its inception the Minda Corporation Limited(MCL or the Company) has set its benchmark amongst the leading players in the autocomponents industry.
After decade's low growth, the economy moved into high growth phase. Considering GDPgrowth rate eased to 7.2% (estimated) for the fiscal year, up from 6.7%. In the year2009-10, MCL broke the manacles of a flat sales trend in the previous two years to post a65.42 % growth. Overall, the Company recorded a sale of Rs.33154.91 Lacs and Profit BeforeTax (PBT) of Rs.2151.11 Lacs during 2009-10.
INDUSTRY STRUCTURE AND DEVELOPMENTS
The Indian automobile industry has come under global focus, ranking second only toChina as the fastest growing market in the world. The spate of new launches by the automajors and rising sales graphs over the past few months indicate that the fiscal stimulusseems to have worked wonders for this industry.
The Indian automotive industry has demonstrated sustained growth as a result ofincreased competitiveness and fewer restrictions. Several Indian automobile manufacturersexpanded their domestic and international operations.
The automobile industry in India is the ninth largest in the world with an annualproduction and sales of over 14 Million units in 2009-10.
The cumulative production data for April-March 2010 shows production growth of 25.76 %over same period last year. Passenger vehicles production crossed 2 million and twowheelers production crossed 10 million. The analysis of the sales of automotive industryduring 2009-10 is shown below:-The analysis of the sales data clearly indicates thatIndian automotive industry has turned towards sun rising path.
One of the important aspects of growth in the auto sector is the resulting expansion inavailability of jobs. Both two-wheeler and four-wheeler companies have over the yearsspawned a wide range of ancillary units to meet their component requirements. The spurt indemand for automobiles has also stepped up demand for auto components and other relatedindustries that provide employment in large numbers in both rural and urban areas. One canpresume that revival of demand for two-wheelers and passenger cars has also ensured jobgrowth.
During the year under review, overall automotive export growth rate is 17.90% asagainst 23.61% during the last year. The lower growth rate is result of slower recovery ofglobal automotive industry and continued recessionary trend of demand in automotive sectorin European market.
OUTLOOK
There is a growing consensus across the world that the worst of the financial crisis isover. Economies globally have started to stabilize and recover either from the recessionor severe slowdown in the past 2 years. After having contracted in 2009, the globaleconomy is expected to grow.
The Indian economy has displayed remarkable resilience over the course of the downturnand is expected to grow in full pace. Since 2008-09, the government had engineered asubstantial increase in demand through fiscal measures to compensate for the decline inprivate and export demand. The focus has now shifted to private consumption andinvestment, which are being viewed as key drivers of growth in 2010-11.
The Company has successfully acquired the business of manufacturing and trading ofElectronic and Mechanical Security Systems including Door Handles and Gear Locks for fourwheeler vehicles, commercial vehicles, sports utility vehicles and principal parts thereoffor supplies to existing After Market and Original Equipment Suppliers in India alongwiththe assets and employees relating to said business. It will strengthen the Company's imagein aftermarket and will boost the demand of the Company's products.
In addition to this, your Company is exploring all sorts of business modalities likemerger, acquisitions, joint venture and other arrangements to enter into global market forits existing and new range of products for expansion.
In the current scenario, the Indian auto component industry is one of the few sectorsin the economy that has a distinct global competitive advantage in terms of cost andquality. Your Company is taking all necessary steps to minimize its cost at all level ofoperations to meet the stiff competition. Innovation and cost pruning hold the key tomeeting the global challenge of rising demand from developed countries and competitionfrom other emerging economies.
OPPORTUNITIES AND THREATS, RISKS AND CONCERNS
The global automotive industry is in transition in many key markets and theconsolidation and restructuring issues relating to regulatory compliance & riskmanagement, climate change and other trends are creating significant transitionalchallenges and opportunities throughout the automotive value chain.
Your Company is supplying major portion of its production to the OEM's. Therefore, thefortune of the Company is directly linked with the performance of OEM's. Your Company istying-up with all major OEM's in India and abroad to grab the purchase orders for theirnew models through innovations, designs & development. Your Company has already filedvarious patents to claim priority for innovation and to protect the Intellectual Propertybeing created by the team of experts in the Company. Your Company is also expected tointroduce new range of products such as Wiper System for four wheelers and e-BikeControllers for BLDC motors.
Due to the recession, different countries were keen to purchase from India as we are alow-cost destination. India has also improved in its quality and standards. We expect thatin next two or three years we will witness different type of parts coming into India.
India is currently the second largest motorcycle market, behind China. The NationalCouncil of Applied Economic Research (NCAER) estimates that this segment will expand atdouble-digit levels for the next two years. It also predicts that sales of motorcycleswill continue to be far in excess of scooters and mopeds. Your Company is in the advancestage of discussion with major OEM's engaged in the production of motorcycles and scootersin India for supply of components for their new models to be introduced in near future.
The Indian auto components manufacturers are facing uphill task in meeting the surge indemand, yet unable to expand their capacities, as they have just now come out ofrecession. To add to their existing woes, China is flooding with its produce, triggering aprice war. The imports of auto parts from China realising the alarming situation.
The automotive OEMs refrain from sourcing components from overseas markets and preferto procure parts from the domestic market itself. In usual circumstance, what these OEMsdo is to build relationships with the domestic vendors near their facilities and when theyforay into overseas markets like India, they bring in these suppliers along.
Though, compared to Chinese auto component manufacturers, Indian players are better offin terms of quality, nevertheless, the overseas OEMs are not too sure that the qualitylevels have improved over the years.
As far as the Indian OEMs are concerned, they still prefer Indian suppliers to China.Your Company has already set-up its plants at all the locations including Pune, which is ahub for all major automotive OEMs to supply its products according to the theirrequirement.
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
The Company's business activity falls within a single business segment in terms ofAccounting Standard-17 on Segmental Reporting. Hence there is no separate reportablesegment.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an adequate system of internal controls to ensure that all assets aresafeguarded and accounted for and business transactions are authorised and recorded. Anexternal established audit firm carries out internal audit. This audit is based on anAnnual Audit Plan and includes regular reviews by the Audit Committee of Directors toensure adequacy of controls and adherence to laid down procedures and systems. The Boardof Directors also carries out Company Wide Risk Assessment and Management on a systematicand regular basis.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
During the year under review your Company has achieved a turnover of Rs.33154.91 Lacsas compared to Rs.20042.94 Lacs during the previous year, thereby showing an increase by65.42%.
The Net Profit of the Company has increased from Rs.919.19 Lacs in the previous year toRs.1803.32 Lacs in the Current year registering a growth of over 96.19%.
These results have been achieved through a dedicated team of management, effectivemarketing strategy and timely guidance from the top level management including Board ofDirectors of the Company.
MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT INCLUDING NUMBEROF PEOPLE EMPLOYED
There is consistent focus on development of Human Resources (HR). HR plans have beendefined with appropriate measurement indicators keeping in mind both long term goals andshort term requirements. Employees' voices are captured through 'Open Houses', the forumthrough which employees are encouraged to voice their concerns, suggest innovative ideasand also seek answers from the top management on issues of common interest. The Companyconstantly reviews facilities and benefits to enhance overall employee well being.Employee Satisfaction/ Engagement Surveys have been done through external agency toformally assess the voice of employees. Action plans have been prepared and are beingimplemented to increase employee engagement.
The Company has initiated measures like employee referral scheme, engaging moreconsultants and providing growth opportunities to existing employees. Your Company hastaken initiative to enhance the skills and capabilities of the employees through trainingprogramme being organized at group corporate level under the umbrella of "MindaGurukul" The Performance Management System (PMS) recognizes individual and segmentcontribution through performance linked pay, thereby motivating employee ownership. PMShas been strengthened to include assessment on Minda Future Development LeadershipPractices, training need assessment, identification of high potential employees anddevelopment plan for employees.
The Company maintained cordial industrial relations during the period under review. Thetotal manpower employed during the period was (approx) 2400.
CAUTIONARY STATEMENTS
Statements in the Management Discussion and Analysis describing the Company's estimatesor expectations may be forward looking predictions' within the meaning of applicablesecurities laws and regulations. Actual results may differ from such estimates,projections, etc., whether expressed or implied. Factors which would make a significantdifference to the Company's operations include achievement of better quality and goodmarket price in domestic and overseas market, changes in Government regulations and taxlaws, economic conditions affecting demand / supplies and other environmental factors overwhich the Company does not have any control.