Global Economy
FY22 marked the global economy recovery from the Covid-19 pandemic with
many parts of the world lifting restrictions and several economies returning to their
pre-Covid-19 position. However, Russias invasion on Ukraine and economic sanctions
resulted in escalated energy costs, supply-chain disruptions and record high inflation. As
a result, the world economy is going through an uncertain period.
Indian Economy
Indias GDP grew at 8.7% in the FY22, as per the data released by
the National Statistical Office (NSO). GDP shows growth after the Covid-19 pandemic in
2020.
Among the G-20 economies, India is the fastest growing economy. It has
the capability to prove it is a ‘reliable partner for the world. India is
currently No. 2 on the Global Retail Index.
In the recent turn of events, the Reserve Bank of India (RBI) raised
the repo rate - the rate at which it lends money to commercial banks - by 40 basis points
to 4.4% in May 2022. The rate had been reduced to a record low of 4% during the Covid-19
pandemic.
Auto Industry
The Indian automotive industry is one of the key drivers of economic
growth in India and contributes to 7.1% of the GDP Due to its deep integration with other
industrial sectors, it is a major driver of exports and employment.
The transition from Internal Combustion Engine (ICE) to battery powered
electric vehicle (EV) is happening at a rapid pace. The Government has made a significant
policy push by promoting the upcoming EV segment. Huge investments in electrical
architecture are getting in place, such as battery development, electrification, e-motors,
and power electronics.
Although the automotive industry and the auto component industry have
been recovering from a difficult challenge including high raw material prices, logistic
issues, and semiconductor shortage but with the help of the Government and innovation,
this sector will soon have a bright future.
Group Overview
PPAP Automotive Limited commenced its business in 1978 and entered the
automotive component business in 1985 with the start of operations of Maruti Suzuki in
India. Since then, the Company has been expanding its customer base and adding new
products to its portfolio. The focus of the Company is to become a global level excellence
company which can inspire people to outperform their potential to by exceeding the
expectations set forth by customers, society as well as stakeholders.
With over four decades of responsible business practices, our
businesses have grown into wide range including automotive sealing system, interior and
exterior automotive part, rubber automotive sealing system, commercial tool room, pail
containers, etc.
The company has a Joint Venture with Tokai Kogyo Company Limited for
manufacture of rubber automotive sealing system.
The products manufactured by us are all engine-agnostic products and
can be extended to the electric vehicles as well.
The global automotive industry is undergoing a paradigm shift towards
less energy intensive options. India, too, is investing in this electric mobility shift.
We have established 100% subsidiary known as PPAP Technology Limited to focus on this
enormous opportunity.
The Company also rolled out aftermarket business named Elpis Components
Distributors Private Limited, which is 100% subsidiary of PPAP The focus is to develop and
supply spare parts as well as premium car accessories and cleaning products for
automobiles.
Automotive Parts Business:
Over the years, PPAP has emerged as one of the largest manufacturers of
automotive sealing systems, interior, and exterior injection moulded products. The
Companys performance has helped it gaining trust amongst customers. The Company
serves almost all major OEMs in the passenger vehicle segment and caters the need of
commercial and two-wheeler segment.
The Company has 5 manufacturing facilities for its OE business located
at Noida (Uttar Pradesh), Surajpur (Uttar Pradesh), Pathredi (Rajasthan), Vallam Vadagal
(Tamil Nadu) and Viramgam (Gujarat). The Company has also established three sales office
for OE Business in Gurugram, Pune and Chennai. (The Companys product portfolio for
Automotive Parts business is shown on page no ?)
Aftermarket business:
The Company has ventured into the after-market business as part of its
growth and de-risking strategy. The Company through its wholly owned subsidiary company,
namely Elpis Components Distributors Private Limited ("Elpis") is engaged in
this aftermarket business. The cornerstone of Elpis is to supply sustainable &
reliable products. Elpis supplies spares as well as premium car accessories to the
customer. Elpis is establishing a distribution network and has forayed into e-commerce by
promoting the products on e-commerce websites (Amazon, Bodmo) as well as its own online
shopping portal (shopelpis.com).
Elpis started this business with a warehouse in Okhla, New Delhi and
currently spread to Dadri, Greater Noida for storage & distribution to PAN India and
nearby countries like Nepal and Bhutan. (The Companys product portfolio for premium
car accessories business is shown on page no ?).
Commercial Tooling Business:
The Company commercialized its Tooling facility in 2019 to make plastic
injection tooling. The tooling facility can develop Gas assist moulds, multi cavity
moulds, hot runner with / without sequential valve gate etc. for the products having
special requirements like chrome plating, painting, high gloss and graining. The
commercial tooling facility is developing tooling for Automotive, Electrical, White Goods
and Medical sector.
The Tooling facility is situated at Surajpur Industrial Area, Uttar
Pradesh. (The Companys tooling portfolio is shown on page no.). Electric Vehicle
Component Business
The Company has also ventured into the electric vehicle market by
establishing a wholly owned subsidiary PPAP Technology Limited ("PTech") in
2020. The purpose of PTech is to develop solutions for the mobility as well as energy
storage system customers. PTech has in-house designing capabilities for battery packs.
Apart from developing in house capability, PTech is tying up with renowned institutions
and technology start-ups to develop value added solutions for its customers.
Our focus is on the enhancement of our in-house ‘R&D Testing
facilities to conduct testing for batteries, Cells, Chargers, BMS etc. We are also
working to strengthen our ‘After sales service by establishing service centres
in North, South & East zones. The facility is in Noida, Uttar Pradesh. (The
Companys product portfolio is shown on page no.)
Pail Container Business
The Company has ventured into development of pail containers.
Leveraging the know-how developed in the plastic injection molding technology, the Company
realized this opportunity for customers in agriculture, lubrication, and paints sectors.
The facility is located at Surajpur Industrial Area, Uttar Pradesh. (The Companys
pail containers portfolio is shown on page no.)
Opportunities and threats Opportunities
• "Electrification" - Capturing market opportunity in
the growing EV space
Electrification of vehicles is beneficial for the environment and is
further likely to expand in the overall industry, promoting growth. The increasing number
of electric vehicles is an indicator of the changing customer perception and will
encourage OEMs and OEM partners to invest significantly. Moreover, India could be a leader
in shared mobility by 2030, providing increased opportunities for electric and autonomous
vehicles.
• Affirmative Government Policies
Government policies such as the recently announced 76,000 Cr. for the
semiconductor manufacturing scheme, the extension of the FAME-II scheme till 2024,
improved incentives for the 2-Wheelers segment, production-linked incentive (PLI) scheme
for the Auto and Auto Component sector for 26,000 Cr., and PLI for advanced chemistry cell
for 18,000 Cr. will provide enormous support as it implements innovative technologies.
• Continue to focus on R&D to develop new and innovative
systems and components
With deep emphasis on R&D and innovation, we aspire to enhance and
adopt newer technologies consistently.
Threats
• Rise in Inflation
Increase in borrowing cost and inflation has led to the increase in the
cost of production of vehicles which may result in demand slow down and erosion in
margins.
• Product Complexity and Ever-changing Market Dynamics
Product cycles are shrinking due to shortening technology cycles and
rapidly changing customer needs, requiring real-time agility and visibility across the
participants in the entire value chain. These are the most important factors capable of
changing the demand or supply scenario in the market dynamics. Thus, several other digital
& connected services have become the key value driver for automotive players.
• Change in regulations and industry trends
The automotive industry is subject to environmental and other
regulations, and therefore any adverse impact on the industry in general and the
Companys customers, due to any change in such rules, can affect its business.
Risks
• Obsolescence in Technology
The risk of obsolescence in technology is prominent. The Company
manufactures a range of vehicle components that require ongoing technical updates to meet
customer requirements.
• Volatility in the Raw Material Prices
The Companys business could be affected by commodity price
volatility which could affect the overall cost of manufacturing operations.
• Risk of losing the opportunity to alternate mobility solutions
With the rise of electric cars as customers preferred mode of
transportation, the automotive sector is undergoing significant transformations, with new
development areas in high-tech and electronic products and services. Similarly,
auto-ancillary enterprises must engage in research and development to produce goods for
the burgeoning growth area or risk becoming obsolete.
Outlook
Globally, the automobile industry is experiencing progressive changes
that will result into a major transformation, resulting in high technological investments
and higher consumer costs. Additionally, these adjustments have reached a point of
inflexion. As a result, the industry would be disrupted, providing Indias automotive
component sector with a chance to innovate and produce high-quality goods at low rates,
paving the path for the country to dominate in such an unpredictable scenario.
However, due to geopolitical concerns, supply-side restrictions caused
by semiconductor shortage, rising inflation, and central bank monetary policy tightening,
the domestic and global economic outlook will remain unclear in FY23. The Indian
government is concentrating on growing the economy through various indigenous projects
that will help India become AtmaNirbhar. Furthermore, these initiatives will assist the
economy in overcoming and capitalising on the opportunities presented.
Financial Performance
Despite the challenging operational environment, the Company reported a
revenue growth of 27.4% on stand-alone basis and 30.9% on a consolidated basis.
The consolidated EBITDA witnessed an increase of 17% during FY22 and
stood at 38.6 Crores. The operating profit margin in FY22 is 2.94% against 3.10% in
FY21. Significant changes in key financial ratios along with explanation forms part of
Note no. 45 of standalone financial statements.
Internal Control System and their adequacy
The Indian industry has witnessed a major shift towards better internal
controls with mandatory implementation of internal financial controls (IFC). The Company
has put in place strong internal control, systems and processes and keeps reviewing their
adequacy from time to time. There is a strong system of both internal review as well as
review by external independent auditors.
Human Resources
Human Development is the key foundation of growth for the Company. The
Company has embarked on a journey to develop the mind, body, and intellect of the people.
The Company has a strong and diverse workforce where every employee is
involved as "partners in progress" of the Company. The Company believes in
building a capable and agile workforce to achieve its business objectives. It continuously
trains and prepares its people for the changing market scenario, maintain its competitive
edge and unleash their full potential. PPAPs basic policy for training and
development is the cultivation of "Teach and be Taught" culture to learn and
pass on this knowledge and skills to the next generation. The Company has total 1830
employees as on March 31,2022.
Safety, Health, and Environment
PPAP continually strives to accomplish ESG (Environment, Social and
Governance) parameters.
PPAP is undertaking various environment management programmes &
projects to reduce GHG footprints, energy & water intensity and waste reduction from
its manufacturing operations aligning the SDGs (Sustainable Development Goals).
The key areas are:
• Prevent pollution and reduce environmental impacts.
• Waste optimization regulations.
• Governing chemicals; and
• Contribution towards global SDG
Several certifications adopted by PPAP in this area as elaborated
below:
| Location |
ISO IATF 16949: 2009 |
ISO 14001: 2015 |
ISO 45001: 2018 |
ISO 50001: 2018 |
| PPAP |
|
|
|
|
| Plant at (Noida) |
Y |
Y |
Y |
Y |
| Plant at (Surajpur) |
Y |
Y |
Y |
Y |
| Plant at (Pathredi) |
Y |
Y |
Y |
Y |
| Plant at (Vallam Vadagal) |
Y |
Y |
Y |
* |
| Plant at (Viramgam) |
Y |
Y |
Y |
* |
| JV Company |
|
|
|
|
| Plant at (Surajpur) |
Y |
Y |
Y |
* |
| Plant at (Viramgam) |
Y |
Y |
Y |
* |
Cautionary Statement
Statements in the management discussion & analysis report
describing the Companys objectives, expectations or forecasts may be forward looking
within the meaning of applicable laws. Actual results may differ materially from those
expressed in the statement. Important factors that could influence the Companys
operations include global and domestic demand and supply conditions affecting selling
prices, raw material availability and prices, changes in government regulations, tax laws,
economic developments within the country and other factors such as litigation and
industrial relations.
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