ECONOMY OVERVIEW
The Indian automobile industry has historically been a good indicator
of how well the expansion and technological advancement. _The rising logistics and
passenger transportation industries are driving up demand for commercial vehicles. Future
market growth is anticipated to be fueled by new trends including the electrification of
vehicles, particularly three-wheelers and small passenger automobiles.
India is also a prominent auto exporter and has strong export growth
expectations for the near future. In addition, several initiatives by the Government of
India such as the Automotive Mission Plan 2026, scrappage policy, and production-linked
incentive scheme in the Indian market are expected to make India one of the global leaders
in the two-wheeler and four-wheeler market._
The Indian automotive sector is a vital growth driver of the Indian
economy, with valuable contribution to GDP and creating jobs for millions. The Indian
automobile industry has historically been a good indicator of how well the economy is
doing, as the automobile sector plays a key role in both macroeconomic expansion and
technological advancement. Major four wheeler companies recorded highest growth in annual
sales in 2022.
The Governments initiative by introducing battery-swapping
policy, expansion of Indian National Highways and adding advanced technologies including
alternate fuel systems such as compressed natural gas (CNG), Bharat Stage VI compliant
flex-fuel engines, electronic control units (ECU) for safety, advanced driver assist
systems and e-quadricycles, under the Production-linked incentives (PLI) scheme for
automobiles has attracted new investment has further provided boost to the industry. The
Indian auto industry is expected to record strong growth in 2023-24.
Industry Structure & Development
The Company manufactures the plastic injection moulded automotive
components i.e. bumpers, instruments panels, grills etc. as original equipments and
for spare parts market primarily for Maruti Suzuki India Limited (MSIL) at two of its
manufacturing locations in Gurugram & Manesar in the state of Haryana.
The company has put up tool room or mould manufacturing, repairs and
their refurbishment facilities in Manesar, Haryana for captive use and to service its
customer in a cost efficient manner. The company has received positive response from the
market.
The company has been dealing in all size plastics automotive
components. The company has 63 nos. injection molding machines, sizes ranging from 100 Ton
to 3150 Ton clamping force. The company also provides job work facilities for Industrial
Products like pallets, garbage bins etc. The company also manufactures moulds for in house
requirements and for others like MSIL, Daikin, VECV etc.
Opportunities & Threats
Growing market of India has already attracted all major automotive
companies to start operation here. India is expected to be one of major auto hub in the
world map soon.
The principal customer of the company is Maruti Suzuki India Limited
(MSIL). Growth of the company mainly depends upon the growth of MSIL. However company does
not have plant at Gujarat to cater to Suzuki Motor Gujarat.
MSIL continues to be the leader in Indian car market and has closed the
financial year 2022-23 with domestic sale of 1,644,876 units and total sales of 1,966,164
units. Marutis domestic sale in 2022-23 represents a growth of 20.5% over 2021-22
and total sales in 2022-23 represents a growth of 18.97% over 2021-22.
Your company is positively working towards expanding its operation to
other customers.
The small to large size of machine range helps your company to cater to
all types of customers part requirement. Moreover, the machines are versatile to
process virtually all types of polymers and can make not only automotive but also other
plastic goods by changing moulds. Thus, your company has immense capability to keep pace
with the growing and diverse requirement of MSIL as well it has the possibilities for
other business besides automotive.
The possible threats to the company can be:
• Fluctuating Market conditions
• Uncertain Monsoon Impacting Market Growth
• Technological change
• Reduction in market share of main customer
• Competitions and main customer policy of in house production of
Bumpers & IP
• Government Policies
• Limit ed Geographical presence at main customers all plant
locations
Segment-wise or Product-wise Performance
Currently your company has single segment and it operates in
manufacturing of injection moulding plastic components and moulds / dies and is trying to
diversify its product and range of industry it caters to. Your company now also has
capabilities in moulding smaller and intricate functional and aesthetic parts in
automotive and other industries.
Your Company has also received tooling business from customers other
than MSIL and making efforts in exploring alternate business opportunities in mould making
and for replacement market.
Indian economic review
Amidst the global energy crisis and continued supply-chain disruptions,
the automotive industry players are exploring options to reintroduce the sector. By
implementing cloud computing and electric vehicles technology, the industry is entering
fast into a revolutionised age with the primary aim of offering the consumer a value-added
experience.
The Indian automotive industry has many opportunities for vehicle
manufacturers, making it a viable option for business expansion.
Most importantly, the demand for electric vehicles has started to grow
in India. Currently, the market share of EVs in Indias automotive sector is standing
at 0.7%; however, by 2027, this figure is set to reach 3.8%.
With demand still buoyant in the passenger vehicle segment despite
challenges of commodity price increases, many automobile manufacturers are up beat to
embrace new technologies, specially in the electric mobility space which is expected to
witness a slew of launches in both four- and two-wheeler categories in the coming year.
Y-o-Y growth of the Indian economy
| Region growth % |
FY 19-20 |
FY 20-21 |
FY 21-22 |
FY 22-23 |
| Real GDP growth (%) |
4.2 |
(7.3) |
8.9 |
7 |
Outlook
Currently, the energy crisis, gas shortages, rising inflation and
Federal Reserve rates, labour shortages, high consumer demand, and unpredictability in the
supply chain are some of the handicaps being faced by the automotive industry. However,
the rising demand for electric vehicles (EVs) is something to look out for.
According to a study, the market share for electric vehicles is on its
way to rise to 54% by 2035. Moreover, sales of automobiles on digital platforms,
integration of wireless technology in cars, and entry of connected and autopilot-enabled
vehicles in the market are some of the factors that are going to fuel the growth of the
automotive industry.
Indian Automobile Sector
The automotive industry in India is set to expand at a compound annual
growth rate (CAGR) of 11.3% till 2027. This growth will most likely occur due to factors
like rising disposable income, wide availability of credit and financing options, and
growth of population. Furthermore, with the growth of the passenger transport sector and
the rise in demand for commercial vehicles, the potential for future growth of
Indias automotive sector is pretty high.
Apart from this, industry-friendly policies and initiatives, the Indian
Government will also play a major role in fuelling this development in the years to come.
The future growth expected in the domestic automobile industry will
give a fillip to the auto component sector. The Indian automobile industry as a whole
offers great potential considering the low penetration along with rising income levels and
a rapidly growing middle class. These factors will witness a boost in demand for passenger
cars and two wheelers. With the automobiles industry fast growing in terms of volume and
number of players, your company foresees a bright future.
Risks & Concerns
2022 was challenging for the worlds major automakers, as supply
chain disruptions made it hard to produce enough vehicles to meet demand. The disruptions
are now easing and dealers should have more cars to sell.
In 2023, the automotive industry will face global headwinds such as
the_energy crisis, slower global demand, and ongoing supply-chain issues. Despite these
challenges, global new-vehicle sales are projected to remain fiat, with new-car sales
increasing.
Favourable government policies such as the extension of FAME-II scheme
till 2024, enhancement of incentives for two-wheelers and launch of the production-linked
incentive (PLI) scheme for auto and auto component sector will provide enormous support to
the sector as it adopts advanced technologies.
Though India rides on some inherent strength, following risk factors
exist which the auto component manufacturers may have to counter with:
• Economic slowdown can derail the prospects of the industry.
• Volatility in the prices of material and other inputs could
erode the industrys cost competitiveness. Furthermore OEMs demand reduction in
prices every year.
• Intense competition from counterparts may add further pressure
on margin of manufacturers.
Currently, the_energy crisis, gas shortages, rising inflation and
Federal Reserve rates, labour shortages, high consumer demand, and unpredictability in the
supply chain_are some of the handicaps being faced by the automotive industry.
Exchange rates fluctuations coupled with movement in prices of Crude
Oil and down-stream Petrochemicals, trade war, any government sanctions on supply chain
etc. are all concern areas.
The overall trend is challenging, but remaining competitive in this
changing scenario will be the toughest challenge. The combination of low manufacturing
costs along with quality systems would give an edge to companies in terms of pricing and
quality. Expansion and diversification will help break into new markets. It would be
imperative for these companies, which are largely based on traditional management
practices, to imbibe technology in a big way. The SMEs can exploit these opportunities
through joint ventures, collaboration and technical tie-ups. Knowledge, specialization,
innovation and networking will determine the success of the SMEs in this globally
competitive environment.
Your company is power, manpower and capital intensive business. Power
is obtained from Maruti from its co-shared power plant which runs on gas and DHBVN Ltd and
DG Set. The increase in per unit cost of power supply will materially affect the cost of
production. Company has installed 1350 K.W. Solar Power Plants at its Manesar Plant and
Gurugram plant which is likely to generate 15 lakh units in a year. This will help in
power cost management.
Your company has availed net metering facility from UHBVN/DHBVNL/ HVPNL
for both Gurugram & Manesar plant of the Company which in turn will save the energy
bills.
Risk Management Report
Your Company believes that, periodic review of various risks which have
a bearing on the business and operations is vital to proactively manage uncertainty and
changes in the internal and external environment so that it can limit the negative impact
and capitalize on opportunities.
Risk management framework enables a systematic approach to risk
identification, leverage on any opportunities and provides strategies to manage, transfer,
avoid or minimize the impact of the risks and helps to ensure sustainable business growth
with stability of affairs and operations of the Company.
Keeping the above in view, your Companys risk management is
embedded in the business processes. As a part of review of business and operations, your
Board with the help of the management periodically reviews various risks associated with
the business and products of the Company and considers appropriate risk mitigation
processes. However, there are certain risks which cannot be avoided but the impact can
only be minimized.
The risks and concerns associated with each segment of your
Companys business are discussed while reviewing segment-wise Management Discussion
and Analysis. The other risks that the management review includes:
a) Industry and services risk: This includes economic risks like
demand and supply chain, profitability, gestation period etc.; services risks like
infrastructural facilities; market risks like consumer preferences and distribution
channel etc.; business dynamics like inflation/defiation etc.; competition risks like cost
effectiveness.
b) Management and operational risks: This includes risks to
property; clear and well-defined work process; changes in technology/ upgradation; R&D
risks; agency network risks; personnel and labour turnover risks; environmental and
pollution control regulations; locational benefits near metros.
c) Market risks: This includes raw material rates;
quantities, quality, suppliers, lead time, interest rate and forex risk.
d) Political risks: This includes elections; war risks; country /
area risks; insurance risks like fire, strikes, riots and civil commotion, marine risks,
cargo risks etc.; fiscal/monetary policy risks including taxation risk.
e) Credit risks: This includes creditworthiness; risks in
settlement of dues by clients and provisions for doubtful and bad debts.
) Liquidity risks: This includes risks like financial solvency and
liquidity; borrowing limits, delays; cash/ reserve management risks and tax risks.
g) Disaster risks: This includes natural calamities like fires,
foods, earthquakes, etc.; man made risk factors arising under the Factories Act, Mines
Act, etc.; risk of failure of effective disaster management plans formulated by the
Company.
h) System risks: This includes system capacities and system
reliability risks; obsolescence risk; data integrity risk and coordination and interface
risk.
i) Legal risks: This includes contract risks; contractual
liabilities; frauds; judicial risks and insurance risk.
j) Government policies: This includes exemptions, import licenses,
income tax and sales tax holidays, subsidies, tax benefits etc.
Financial Performance
Net turnover of your Company has increased by 24.84% from Rs. 26,534.53
lakh in 2021-22 to Rs. 33,126.77 lakh in current year. Your Company has earned a pre-tax
profit of Rs. 214.15 lakh as compared to loss of Rs. 344.39 lakh in the last year. Company
has earned cash profit of Rs. 1,501.10 lakh as compared to Rs. 1,017.49 lakh in 2021-22.
| Particulars |
Numerator |
Denominator |
For the year ended March 31, 2023 |
For the year ended March 31, 2022 |
Variance |
| Current Ratio |
Current assets |
Current liabilities |
0.71 |
0.67 |
5.62% |
| Debt Equity Ratio |
Total debt |
Shareholders equity |
1.72 |
1.90 |
-9.71% |
| Debt Service Coverage Ratio |
Earnings available for debt service1 |
Debt service2 |
1.06 |
0.90 |
17.44% |
| Return on Equity5 |
Net profit after taxes |
Average shareholders equity |
3.19% |
-4.90% |
N.A. |
| Inventory Turnover Ratio |
Revenue |
Average inventory |
15.74 |
15.62 |
0.82% |
| Trade receivable Turnover Ratio |
Revenue |
Average trade receivable |
7.82 |
7.48 |
4.54% |
| Trade payable Turnover Ratio6 |
Purchases3 |
Average trade payables |
11.58 |
19.59 |
-40.87% |
| Net Capital Turnover Ratio |
Revenue |
Average working capital |
-10.34 |
-8.48 |
21.90% |
| Net Profit Ratio7 |
Net loss |
Revenue |
0.48% |
-0.93% |
N.A. |
| Return on Capital employed8 |
Earnings before interest and taxes |
Capital employed4 |
6.14% |
2.06% |
197.86% |
| Return on Investment9 |
Earnings before interest and taxes |
Average total assets |
4.92% |
1.74% |
183.39% |
1. Net Profit after taxes + Non-cash operating expenses + Interest +
other adjustments like loss or gain on sale of Fixed assets etc.
2. Interest + Lease payments for the current year + Repayments of
long term borrowings
3. Purchase of raw material + stores and spares including repair
& maintenance + packaging
4. Total equity + Lease liabilities + Total borrowings + Deferred
tax liability – Intangible assets
Reasons for variations
5. Return on Equity ratio has increased primarily due to increase in
turnover and higher profitability thereof.
6. Trade payable turnover ratio has decreased primarily due to an
increase in purchase or raw material and increase in balance of trade payables at the
yearend, which led to increase in average trade payables.
7. Net profit ratio has increased primarily due to increase in turnover
and higher profitability thereof.
8. Return on Capital employed has increased primarily due to increase
in turnover, higher profitability and decrease in borrowings.
9. Return on Investment ratio primarily increased due to increase in
turnover and higher profitability thereof.
Internal Financial Control System and their adequacy
The Companys internal audit system has been continuously
monitored and updated to ensure that assets are safeguarded, established regulations are
complied with and pending issues are addressed promptly Your company has adequate internal
control systems commensurate with its size and operations, although not documented. The
company regularly gets its accounts audited from the internal auditor.
Further internal audit has been out sourced to M/s Goel Garg & Co.,
Chartered Accountants. The Audit covers all the areas e.g. Finance, HR, Purchase,
Statutory Compliance etc. and regular audits are conducted by Internal Auditors.
Further, the audit committee reviews reports presented by the internal
auditors on a routine basis. The committee makes note of the audit observations and takes
corrective actions wherever necessary. It maintains constant dialogue with statutory and
internal auditors to ensure that internal control systems are operating effectively. Based
on its evaluation (as provided under section 177 of the Companies Act, 2013 and Regulation
18 of SEBI Listing Regulations, the Audit Committee has concluded that as of 31st
March, 2023, the Internal Financial Controls were adequate and operating effectively.
M/S. KMGS & Co. Chartered Accountants, the Statutory Auditors of
the Company audited the financial statements included in this Annual Report and issued a
report on the internal controls over financial reporting (as defined in Section 143 of the
Companies Act, 2013).
Contingent liabilities and commitments:
(i) Contingent liabilities not provided for
Demand under the Central Excise Act Rs. 24.87 lakh (Previous year of
Rs. 559.54 lakh)
DGGI has dropped more than 95% of demand on the ground that running
royalty cannot be added for computing cost of Drawings and Designs. DGCEI has further
dropped personal penalty proposed against Shri. Sanjiivv Jindall, Whole Time Director.
Based on familiarity with the matters and legal position prevailing as
on date, management believe that the issue being raised by the revenue authorities in the
above matters does not have any statutory backing and is supported by various judicial
precedents in favour of the company. In managements view, the company has a strong
case in its favour in the above matters.
(ii) Guarantees
In respect of Bank Guarantees- Nil (PreviousRs. year 156.79 lakh)
(iii) Commitments
Estimated amount of contracts, remaining to be executed on spare parts
of machinery (net of) Rs.advances 6.01lakh (approx.) payable in USD 7300/- (Previous year
Rs. 1.56 lakh (approx.) payable in EURO 1850).
Human Resources/Industrial Resources
The Company believes that the quality of employees is the key to its
success. In view of this, it is committed to equip them with skills, enabling them to
evolve with technological advancements.
During the year, various initiatives had been taken by the Company to
improve the performance and productivity levels in various departments of the company. The
company has its own in-house technical center in the plant to train the new recruits
before their placement that helps in optimum utilization of resources as well as
maintaining quality standards. It also indulges into and implements various HR initiatives
and activities including employee welfare, special rewards, performance review system and
various employee motivation activities.
The HR department of the Company was continuously in touch with
employees to guide and solve problems. It created awareness regarding COVID-19 and
educated employees about precautions.
The company has already undertaken KAIZEN with an aim to become a world
class company. Your company has already adopted the suggestions scheme in the company
which is increasing the employees participation in managing the company.
Cautionary Statement
Management Discussion and Analysis Report may be forward looking
statement. Actual result may differ materially from those expressed or implied depending
upon global and Indian regulations, tax regimes, and economic developments within India
and overseas.
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