Pursuant to Regulation 34 read with clause B of Schedule V of the SEBI (LODR)
Regulations 2015 (Forms an integral part of Board’s Report)
INDUSTRY STRUCTURE AND DEVELOPMENT
With the increasing growth in demand on back of rising income, expanding middle class
and young population base, in addition to a large pool of skilled manpower and growing
technology, will propel India to be among the world’s top three auto-producers by
2026 as per AMP-2026. The latest budget India’s CAD has also come down to 0.3% of GDP
in first half of 2016-17 as against 1.0% GDP of last year 2015-16.
CPI based inflation declined to 3.4% in December 2016 from 6% in July and 5.4% in
financial year 2015-16. Foreign exchange reserves of were at the highest ever level of
about 361 billion US dollars on January 20, 2017 as against 350 billion US dollars in last
fiscal year 2015-16, in spite sharp decline in Foreign Investment in overall world.
Economic Growth rate forecast was revised to 7.1% from 7.6 % due to war against
corruption initiated by the Government of India on November 08, 2016 in form of
demonetization due to which 86% of India’s currency in circulation was abolished its
legal tender; However in first quarter of financial year 2017-18 The Indian economy
advanced growth rate of 6.1 percent year-on-year, slowing sharply from a 7 percent
expansion in the previous period in the year 2016 and well below market expectations of
7.1 percent. It was the lowest growth rate since the last quarter of 2014, due to a
slowdown in consumer spending and a drop in investment, following the demonetization
program. In addition, the government changed the GDP base year for 2011-2012 from
2004-2005.
The Indian auto industry is one of the largest in the world. The industry accounts for
7.1 per cent of the India’s Gross Domestic Product (GDP) as per AMP 2006-2016. For
the last few years the Auto Industry has been going though low sentiments. Despite the
meager growth in past, the automotive market is expected for steady growth in the coming
years.
Auto Sector is a major employment generator, GDP contributor, FDI earner and major
instrumental in shaping the Indian Economy and one of the important contributors for all
success of Make in India initiative of Government of India. In order to furtherance of
structured Growth of Automotive Industry, the requirement of stable policy of Government
of India is needed. The collective efforts of Government of India (Government) and Indian
Automotive Industry Automotive Mission Plan-2016-2026(AMP-2026) was framed with aim:
• To propel Indian Automotive industry to the engine of the make in India program,
which is expected to contribute in excess of 12% of India’s GDP.
• To make Indian Automotive industry a significant contributor to Skill India
program which resulted to make this sector one of the largest job creating engine in
Indian economy by creating 65 million additional job by 2026.
• To seeks enhancing universal mobility for every person in the country, with eye
on environmental protection, affordability through both public and personal transport.
• To increase the export of vehicle by 5 times and component by 7.5 times and in
next 10 years the Indian Automotive Sector becomes one of the major automotive export hub
in the world.
• To provide comprehensive and stable policy for development of Automotive
industry.
As first AMP-2006-16 had come to end in the year 2016, it is pertinent for us to
highlight its achievements, which are as under:
• The Automotive Industry has achieved the target of incremental job creation of
25 million over the past.
• India has attracted significant quantum of investment from Global and local OEM
as well as components manufacturer, exceeding the target of Rs.1,57,500/- crores.
• While domestic sale volume target of commercial vehicles, passenger vehicles and
tractors have achieved however there are decline in sales volume by the components, two
and three wheeler manufacturers as compared to target set.
India has implemented Bharat Stage –IV (BS IV) emission norms with effect from
April 01, 2017. AMP-2026 set the target that BS-V emission norms may be adopted by India
in year 2019 for new models and BS-Vi to be adopted by 2023 for four wheeler vehicles.
AMP 2026 recognizes the clear roadmap of safety norms over next decades, which makes
India to comply with Global Standard of safety.
In addition to framing of AMP-2026, Government of India has taken several others
initiatives in recent for Automotive Sector, which are as under:
Introduction of a new Green Urban Transport Scheme with a central assistance of about
Rs 25,000 crores (US$ 3.75 billion), aimed at boosting the growth of urban transport along
low carbon path for substantial reduction in pollution, and providing a framework for
funding urban mobility projects at National, State and City level with minimum recourse to
budgetary support by encouraging innovative financing of projects.
• To promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid
vehicles, and electric vehicles and also made mandatory of 5 per cent ethanol blending in
petrol.
• The Government has formulated a Scheme for Faster Adoption and manufacturing of
Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020
to encourage the progressive induction of reliable, affordable and efficient electric and
hybrid vehicles in the country.
Auto industry has attracted Foreign Direct Investment (FDI) worth US$ 15.79 billion
during the period April, 2000 to September, 2016, according to data released by Department
of Industrial Policy and Promotion (DIPP).
Through the period when growth had slowed down and the economy was not very favorable,
Maruti sustained its position as the market leader and continued to grow and this is
attributable to higher localization, favorable foreign exchange and cost reduction
initiatives by the Company. Maruti expects Indian passenger car market to reach four
million units by 2020, up from 1.97 million units in 2014-15.
OPPORTUNITIES AND THREATS
a) Opportunities
The Indian automobile industry has tremendous potential to grow. India is very cost
sensitive market and has an edge in cost over the European market. Keeping in view of the
potential in Indian Market all leading automotive manufactures are launching new models in
the Indian Market and also shifting their focus from import to localizing their parts to
take the advantage of cost reduction and avoid forex fluctuation. It is expected that in
the coming years India will be one of the top five vehicle manufacturing nation. It is
emerging as global hub for auto component sourcing.
b) Threats
The potential in automotive segment has to overcome the following challenges:
1. The industry is facing the low liquidity
2. Increasing Cost of Input
3. Growing competition at domestic as well as overseas market
4. Still High Interest Rates
5. Lack of proper infrastructure
6. Government Fiscal policy and impact after implementation of GST.
7. World economy faces considerable uncertainty, in the aftermath of major economic and
political developments
8. Pressures for protectionism at global
During the year, your Company focused its attention on long term initiatives despite
challenging market situations, with special focus on Research and Development.
SEGMENTWISE PERFORMANCE
The Company is in the business of manufacture of high tensile fasteners. Since the
Company is operating in a single line of product, there are no reportable primary
segments.
Domestic sales were at Rs.251 crores as against Rs.279 crores (approx.) in the previous
year in the light of increase in sales of heavy and medium commercial vehicles, passenger
vehicles and two/ three wheelers. There was a steep drop in production of light commercial
vehicles and tractors. It is expected that the total Domestic sales in Financial Year
2017-18 will grow by 29% on present sale of Rs. 251 crores.
Global economy recovered modestly though not uniformly across all regions. Global
markets continued to be hit by recession and negative sentiments. Exports were decreased
to Rs.7.45 crores in the year 2016-17 as against Rs.30.85 crores (approx.) in the previous
year.
OUTLOOK
The new Government having full majority has clearly indicated its agenda for reviving
of growth trend in India. The Automotive Industry accounts for 45% of India’s
manufacturing GDP, 7.1 of India’s GDP and employs about 19 million people both
directly and Indirectly.
India is currently the sixth largest producer in the world with an average annual
production of 24 million vehicles, of which 3.64 million are exported and as per AMP
2016-26 it will be among the world’s top three auto-producers by 2026. Indian
Automotive industry is expected to contribute in excess of 12% of India’s GDP and
will create 65 million Additional Job by the year 2026.
Government of India recently has taken numbers of reforms and one of the important
reform since independence is passing of GST law in the Country and decided for
implementing of GST with effect from July 01, 2017 which will make India as a market where
one country one tax concept become true, which is expected to decrease inflation and make
goods for common man cheaper, and attract FDI boost Auto Sector Industry as well as
generate new employment both in manufacturing and Service sector.
RISK AND CONCERNS
The Company is exposed to external and internal risks associated with the business. The
Company’s growth is dependent on its customers majorly from the Indian Automotive
Industry, which is facing a low phase for the last few years. However the Company has
widen its operations in terms of product portfolio, customer base and geographical
segment.
The Company is also facing stiff competition from domestic and overseas as well as
facing financial crunches. Your Company has an established name in the market and has
enough strength in terms of product range, capacity and high standards for quality to face
the competition.
Financial risk in terms of increased interest rates, foreign exchange rates, increase
in commodity prices are also a concern for the Company. Though the Company always cautious
for such concerns and time to time review its policy to check these concerns.
Your Company is well equipped to face all kinds of risk and concerns, and confirm that
the Company has a policy on foreign exchange risk management in place which is
periodically reviewed by Audit Committee and Board of Directors.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has a proper and adequate system of internal control to ensure that all
assets are safeguarded and protected against loss from unauthorized use or disposition and
that the transactions are authorized, reported and recorded correctly. Further internal
audit covers all the areas e.g. Finance, Production, IT, HR, Purchase, Statutory
Compliance etc. and regular audits are conducted by Internal Auditors. The Audit
observations are periodically reviewed by the Audit Committee of the Board of Directors
and necessary directions are issued, wherever required.
FINANCIAL PERFORMANCE
The details of the financial performance of the Company are appearing in the Balance
Sheet, Profit & Loss Account and other financial statements forming part of this
Annual report. For financial highlights please refer heading ‘FINANCIAL RESULTS’
of Board’s Report.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER
OF PEOPLE EMPLOYED
The Company believes that the employee is the first customer an organization has to
win, and to fulfill this purpose it is important to have a team whose members are well
conversant with both technical and commercial knowledge.
Being a manufacturing Company, workers form an important link in the chain of growth. A
congenial atmosphere has been created at the shop floor level and all facilities required
for a secure and cordial environment are provided. Management at all level takes care of
the interest of the workforce and frequent interactive sessions are conducted throughout
the year.
Your Company continues to reward to its talented employees at all levels to recognize
every effort made towards improvement in the workplace through Kaizen, Quality Circles,
TPM, TQM, 5S activity and individual/team contributions.
The employee-management relations have remained positive throughout the year.
Initiatives are being taken to enhance the productivity of employees. Total employee
strength of the Company is about 954 people employed in manufacturing plants and branch
offices across the Country. The team of employees consists of people who are experts in
their respective and allied fields.
Note:
References were taken from AMP-2016-2026, key features of budget of 2017 as available
at http://indiabudget.nic.in, writes up available at http://www.makeinindia.com ,
https://www.ibef.org, and http://www.siamindia.com/
CAUTIONARY STATEMENT
Statements in the ‘Management Discussion and Analysis’ describing the
Company’s objectives, projections, estimates and expectations may be ‘forward
looking statements’ within the meaning of applicable laws and regulations. The actual
results could differ substantially or materially from those expressed or implied. The
important developments that could affect the Company’s operations including demand
and supply situation in the automobile sector, input prices and their availability,
significant changes in the government policies/ regulations and economic environment in
India, exchange rate fluctuations, tax laws, litigation, labour relations, interest cost
and other factors. Therefore, all concerned should bear all above factors in mind
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