MANAGEMENT DISCUSSION AND ANALYSIS REPORT
ECONOMIC OVERVIEW
Global Economy
The International Monetary Fund (IMF) predicts that global growth will reach 3.4% in
2022, driven by a rebound in economic activity propelled by robust labour markets,
significant household consumption, and increased business investment. This momentum comes
despite turbulence caused by incremental inflation, trade wars, and geopolitical
conflicts. On the supply side, easing bottlenecks and declining transportation costs have
reduced pressure on input prices, allowing for a rebound in previously constrained
sectors, such as the automotive industry.
After a turbulent couple of years characterised by the COVID-19 pandemic and major
disruptions to economic activity, the global economy started to recover in the
postpandemic period. Policymakers were faced with rising costs of living and an
unfavorable business environment, and major global central banks played a critical role in
navigating these challenges. However, their efforts to curb inflation through interest
rate hikes slowed economic activity in major developed markets, while many developing
markets showed signs of resilience and are expected to outperform developed economies in
2023. The reopening of China is also expected to provide strong support for the recovery
of emerging markets. Global inflation is projected to rise from 4.7% in 2021 to 8.7% in
2022, before falling to 7% in 2023. Advanced economies experienced the most widespread
upside inflation surprises, with greater variability in emerging and developing economies.
Looking ahead, global growth is expected to reach 2.8% in 2023 before rising to 3.0% in
2024. Achieving sustained disinflation remains a top priority in most economies, and with
tighter monetary conditions and lower growth potentially impacting financial and debt
stability, it is imperative to deploy macroprudential tools and strengthen debt
restructuring frameworks.
Indian Economy
India has defied global economic challenges and remained the worlds fastest-growing
major economy for the past two years, despite pressures from global recession, inflation,
and public debt, as well as a decrease in real household incomes. This economic success
has been driven by a number of key reforms, including the liberalisation of the economy,
reduction of bureaucracy and corruption, investment in infrastructure, and improved access
to finance for small and medium-sized enterprises. As a result, India has emerged as a
major player in the global economy, with projected continued growth in the years ahead.
The Governments increased spending, as announced in the Union Budget 2023-24, coupled
with a rise in private consumption and investment, is expected to further boost economic
activity and demand.
Earlier, India faced headwinds in the form of inflation, the Russia-Ukraine war, and
supply chain disruptions such as a shortage of semiconductors. However, the momentum of
export growth was sustained up to the first half of 2022-23, increasing Indias share in
the world market of merchandise exports. As export growth slowed down, the rebound in
domestic consumption gained traction, further boosting Indias economic growth and leading
to a rise in domestic capacity utilisation. Despite inflation continuing at a steady and
slow rate, economists anticipate Indias economic growth to be 7.0% for 2022-23, primarily
driven by an economic rebound in private consumption, replacing export stimuli as the
leading driver of growth.
Indian Real GDP Growth (% Change)
| 2019-20 |
2020-21 |
2021-22 |
2022-23 |
| 3.7% |
(6.6)% |
8.7% |
7.0% |
Going forward, Indias positive economic outlook might be impacted by global
challenges, including high inflation numbers, monetary tightening by central banks, supply
chain strains, and geopolitical conflicts. However, some upside factors for Indias growth
outlook exist as well. The expected normalisation of supply chains due to the current
surge in Covid-19 infections in China not having a significant health or economic fallout
for the rest of the world. Additionally, the reopening of Chinas economy is not expected
to cause significant or persistent inflationary pressures, and recessionary tendencies in
major advanced economies may lead to a cessation of monetary tightening and a return of
capital flows to India, given its stable domestic inflation rate below 6%. These factors
could further boost private-sector investment and improve spirits in the country.
INDUSTRY OVERVIEW
Global Automotive Industry Trends
The global economy and vehicle sales witnessed positive momentum during the year,
despite the Ukrainian crisis that caused disruptions in the automotive supply chain and
resulted in higher costs for auto components and raw materials. Leading OEMs showed
resilience and responded to the chip shortage crisis by forming strategic alliances with
semiconductor manufacturers to shift towards in-house chip production. Furthermore, Chip
manufacturers are expanding their production capacity to meet the increasing demand in the
automotive sector. Technology companies are also becoming more involved in the automotive
industry by serving as future mobility enablers. The Asia-Pacific region emerged as the
leading performer in the Auto sales segment, with a growth of
2.7% compared to 2021, setting off the negative performance in the North American and
European region.
Despite the decline in Internal Combustion Engine (ICE) vehicle sales, Electric
Vehicles (EVs) have maintained a positive outlook and have performed exceptionally well in
the consumer market, including Plug-in Hybrid Electric Vehicles (PHEVs). The global
forecast for EV sales in 2022 was estimated to be 27.9% higher than the previous year,
equating to 8.7 Mn EV sales. This trend is expected to continue in 2023, with a YoY growth
rate of 25.2%. As a result, the consumer EV market in 2023 is expected to be 3.5 times
larger than it was in 2020. Furthermore, EVs are anticipated to account for 17.6% of total
consumer vehicle sales in 2023, up from 15.7% in the previous year. The Asia-Pacific
market is projected to be the largest regional market for EVs, with an estimated 7.8 Mn EV
sales in 2023, followed by Western Europe with 3.1 Mn and North America with 1.4 Mn.
EVs have maintained their performance due to advancements in EV battery density, longer
driving ranges, and the increasing availability of EV models in higher-volume segments. As
high- margin models, EVs also receive priority access to components that are in short
supply. Global sales of online replacement parts and accessories are expected to exceed
USD 50 Bn in 2022. As the number of EVs grows, there will be a greater demand for niche
services and EV parts replacement in the aftermarket. New mobility patterns will emerge as
consumer attitudes change and demand services based on lifestyle choices. However, for EV
adoption to increase further, the automotive industry must continue investing in public
charging infrastructure and Vehicle-to-Grid (V2G) solutions.
Indian Automobile Industry
The Indian automobile industry plays a critical role in the countrys economy, being
one of the largest industries. In the previous year, the industry witnessed a surge in
vehicle sales, resulting in India surpassing Japan to become the third-largest automobile
market. This increase was attributed to the easing of semiconductor issues and a strong
demand rebound during the festival season.
The industry experienced a significant boost in 2022-23 due to increased economic
activity and mobility, leading to an overall production of 25.9 Mn vehicles between April
2022 and March 2023, compared to 23 Mn units in the previous year. Sales improved across
most automotive segments, including passenger cars, commercial vehicles, and tractors.
Overall automobile sales during the year increased 20.4% from 17.6 Mn in 2021-22 to 21.2
Mn in 2022-23. Most categories saw double-digit growth during this period.
Domestic passenger vehicle sales in India increased by 26.73% to over 3.9 Mn units in
2022-23, from 3.1 Mn in the previous year. Commercial vehicles had the second-highest
domestic sales, with an increase from 7.2 lacs to 9.6 lac units, representing a growth of
34%. Three-wheelers sales surged from 2.6 lacs to 4.9 lacs units, an impressive growth of
87%, while two-wheelers sales increased from 13.6 Mn to 15.9 Mn units, in 2022-23. In the
same period, passenger vehicle exports rose from 5.8 lacs to 6.6 lacs units.
India has set its sights on achieving carbon neutrality by 2070, and the transportation
sector is a significant contributor to pollution. Thus, the shift towards green practices
is crucial if the country is to achieve its target of reducing the emissions intensity of
its GDP by 45% by 2030. Electric vehicles have emerged as a promising solution for the
future of sustainable transportation, resulting in remarkable growth in EV sales over the
past two years. According to projections, the India electric vehicle market is expected to
grow from USD 3.21 Bn in 2022 to USD 113.99 Bn by 2029, at a CAGR of 66.52% during the
forecast period of 2022-2029.
Indian Automotive Components Industry
The overall Indian auto components industry, currently accounting for 2.3% of Indias
GDP, is expected to become the 3rd largest globally by 2025. The industry is
expected to grow to USD 200 Bn by 2026, from USD 46 Bn in 2020-21, and exports are
expected to reach USD 80 Bn by 2026, up from USD 13.3 Bn in 2020-21, with the USA,
Germany, UK, Thailand, and Italy being the top export destinations. According to the
Automotive Component Manufacturers Association of India (ACMA), the Indian auto components
sector is likely to maintain its growth trajectory going ahead.
In the first half of 2022-23, the auto components sector witnessed steady growth both
in the domestic and international markets, as vehicle sales across all segments reached
pre-pandemic levels and supply-side issues, such as the availability of semiconductors,
high input raw material costs, and non-availability of containers moderated. With major
categories of vehicles registering robust sales in the domestic market in 2022-23, the
Indian automotive components industry is anticipating sustained momentum in 2023-24,
expecting up to 15% YoY growth in the next financial year. The industry clocked revenues
of Rs.2.65 Lac Crores in the first nine months of 2022-23, registering a significant 34.8%
YoY growth, which can be attributed to Indian component manufacturers endeavours to
localise technology and offer high-quality components at competitive prices. Furthermore,
the growing presence of global automobile OEMs in the Indian auto components industry has
significantly increased the localisation of their components in the country.
This growth was further fuelled by the rise in consumption of electric vehicles,
leading to a fast transformation of the auto components sector into an integral part of
the EV manufacturing supply chain. The electric vehicle market in India is set to witness
remarkable growth in the upcoming years. The countrys government policies, growing
consumer consciousness, and technological innovations are all propelling the transition to
a more sustainable and environmentally- friendly mode of transportation. The surge in
sales will not only benefit the electric vehicle industry but also create enormous
business opportunities for components industry associated with it.
Government Incentives
The Indian government has been taking various initiatives to promote the growth of the
automobile sector in the country. These initiatives include the Automotive Mission Plan
2016-26, which focuses on developing the sectors competitiveness and promoting innovation
and National Electric Mobility Mission Plan, which aims to promote the adoption of
electric vehicles in the country, and the Government support, such as the
Production-Linked Incentive (PLI) and the Make in India initiative, is driving growth in
the automobile manufacturing sector. Moreover, the Indian government has set an ambitious
target of attracting local and foreign investments worth USD 8-10 Bn into the automobile
sector by 2023. This goal is further supported by the adoption of clean technology, which
is becoming increasingly important due to rising interest rates and costs, as well as new
emission and safety standards.
During the launch event, the President of COP27 highlighted Indias potential as the
fastest-growing vehicle market in the world, led by emerging trends in electric and
zero-emission vehicles, attracting higher investment in the automotive industry. The
nation has set its sights on making zero-emission vehicles (ZEVs) the norm, including
2&3-wheelers, cars, vans, and heavy-duty vehicles, by 2030.
Furthermore, the countrys shift towards zero-emission vehicles (ZEVs) would also lead
to the creation of new jobs, reduce technology costs, improve air quality, and reduce
dependence on imported fuels. This aligns with the governments vision of making India a
global manufacturing hub for electric vehicles (EVs) and achieving 30% electric mobility
by 2030. Overall, these initiatives are expected to enhance the competitiveness of the
Indian automobile industry and contribute significantly to the countrys economic growth.
To advance Indias electric mobility efforts, NITI Aayog launched two initiatives. The
first is the E-AMRIT (Accelerated e-Mobility Revolution for Indias Transportation) mobile
application, designed to promote awareness of electric mobility. The second is the Report
on Advanced Chemistry Cell Battery Reuse and Recycling Market in India, aimed at advancing
the reuse and recycling of advanced chemistry cell batteries in the country. These
initiatives align with the countrys vision of promoting sustainable transportation and
accelerating the adoption of electric mobility.
The Indian government has been proactive in promoting electric vehicles and has set a
target of 30% electrification of the vehicle fleet by 2030. To support the growth of the
EV industry, the government has introduced several policies and incentives. The 2023-24
Union Budget has allocated a total of Rs.35,000 Crores for capital investments aimed at
achieving energy transition and net-zero targets by 2070. The government is also expected
to provide viability gap funding to support Battery Energy Storage Systems with a capacity
of 4,000 MWH.
To promote the manufacturing of electric vehicles, initiatives such as the Faster
Adoption of Manufacturing of Electric Vehicles Scheme - II (FAME - II) and the Production
Linked Incentive Scheme (PLI) have been launched. The budget has allocated Rs.51.72 Bn
(approximately USD 631 Mn) towards the FAME-II scheme to encourage the adoption of clean
energy vehicles, an 80% increase in budget allocation from previous years. The charging
infrastructure is also being expanded with investments from both the government and
private companies in setting up charging stations. The number of charging stations in
India grew by 285% year over year in 2021-22, and the government aims to expand the number
to 4 lakh stations by 2025-26.
COMPANY OVERVIEW
Established in 1956, Talbros Automotive Components Limited (hereafter ‘Talbros or
‘The Company) is ranked among the leading manufacturers of automotive components in
India. The Company has a strong global market presence and is known for its relentless
customer-focussed strategies, consistent value addition bound by excellence and superior
technology. The Company, along with its joint venture companies, has an extensive product
portfolio comprising Gaskets, Heat Shields, Forgings, Chassis Systems, Suspension Systems,
Anti-vibration Components and Hoses. Talbros caters to different automobile segments,
including Passenger Vehicles, Commercial Vehicles, Two-wheelers, Three-wheelers,
Agricultural machinery, Off-loaders and Industrial vehicles, among others. Through
strategic collaborations with renowned global players and world-class manufacturing
facilities, the Company delivers best-in-class auto components to its customers. Having a
diversified business model, the Company supplies to multiple product categories to OEMs,
and outpace industry growth.
Product Portfolio
| Gaskets |
TACL Standalone |
|
Nippon Leakless Talbros Private Limited |
| Heat Shields |
TACL Standalone |
| Forgings |
TACL Standalone |
| Chassis Components |
Marelli Talbros Chassis Systems Private Limited |
| Anti-Vibration Products |
Talbros Marugo Rubber Private |
| & Hoses |
Limited |
SWOT ANALYSIS
Strengths
• The Companys industry experience of 65 years and its rank among the industry
leaders give it a competitive edge
• Strong relationships with OEMs across various automobile segments, including
passenger vehicles, commercial vehicles, export markets, off-highway vehicles, enabling it
to outpace industry growth
• International technology tie-ups, including three joint ventures, to offer
best-in-class products
• Export orders from established international brands and increasing market share
• State-of-the-art manufacturing facility with best-in-class equipment, resulting
in a wide product portfolio
• High-quality standards endorsed by global certifications, resulting in growing
repeat and referral business
Weaknesses
• Limited presence in supplying components to the electric vehicle industry
currently. However, the Company is building product categories to diversify its presence
across the automobile industry
Opportunities
• The global trend toward electric vehicles is expanding, and Talbros is poised to
harness the potential opportunities based on its strong product portfolio, including
supplying parts for plug-in hybrid electric vehicles to OEMs globally
• The Company has secured orders from top domestic OEMs for Electric Vehicles,
presenting a significant growth opportunity in the rapidly expanding EV market.
• The Company is diversifying its business by expanding into non-automotive
segments, which offers new revenue streams and reduces reliance on a single sector.
• Exports present a significant opportunity for the Company to expand its customer
base beyond the domestic market, tapping into the growing global demand for automotive
components.
• Strong emphasis on R&D and innovation to consistently enhance and adopt
newer technologies, complementing its extensive in-house capabilities to develop embedded
systems, application software, and integration capabilities for improving customer
offerings
• Various initiatives by the government to boost Indian manufacturing units,
including PLI, Make in India Campaign, FAME-II, among others
• The increase in the number of market players entering the automotive development
and manufacturing space is transitioning India into a global automotive R&D hub
• The Indian Governments target of achieving 20% ethanol blending in petrol by
2025 presents an opportunity for the Company. Talbros has already received orders worth ~
150 Crores from multiple passenger vehicle OEMs in India to facilitate the E20 fuel
mechanism
Threats
• Volatility in commodity prices and supply chain disruptions affect the overall
cost of manufacturing operations. Adequate mechanisms are necessary to monitor and manage
such market risks, changes in commodity prices, hedged or offset, which affect overall
business profitability
• Global crises, such as pandemics, economic downturns, or geopolitical tensions
could impact demand for vehicles and disrupt global supply chains. It is therefore
important for the Company to have contingency plans and diversification strategies in
place to mitigate the impact of such crises on its operations and finances
Financial Performance
Talbros remains poised to capitalise on emerging opportunities and take its business to
the next level. The financial performance in the last year is a testament to the Companys
resilience, agility, and commitment to excellence. This is what served as a strong
foundation for the Companys future growth and success.
During the fiscal year 2022-23, Talbros Automotive Components Limited recorded a
turnover of Rs.647.18 Crores on a standalone basis, indicating a growth of 12.12% compared
to 2021-22 where gross turnover stood at Rs.577.24 Crores. The Companys Profit After Tax
(PAT) in 2022-23 was Rs.43.70 Crores, showcasing an increase of 17.95%, whereas for
2021-22, PAT was Rs.37.05 Crores. The consolidated total revenues also increased by 12.12%
from Rs.577.24 Crores in 2021-22 to Rs.647.18 Crores in 2022-23.
DETAILS OF KEY FINANCIAL RATIOS AND SIGNIFICANT CHANGES THEREIN
The details of changes of 25% or more in the key financial ratios as compared to the
previous financial year along with explanations for the same are as under:
| Particulars |
2022-23 |
2021-22 |
Difference |
Explanation for change of 25% and more |
| Inventory Turnover Ratio (times) |
2.86 |
2.89 |
-0.85% |
- |
| Interest Coverage Ratio |
4.02 |
2.38 |
69.14% |
On account of reduction in debt and repayment thereof, due to availability of
internally generated cash in the current year. Further, the profit of the Company
increased on account of overall performance leading to improved ratio. |
| Current Ratio |
1.30 |
1.23 |
5.97% |
- |
| Debt Equity Ratio Operating Profit Margin (%) |
0.27 14.45% |
0.33 14.41% |
-18.72% 0.27% |
- |
| Net Profit Margin (%) |
6.75% |
6.42% |
5.21% |
- |
| Return on Net Worth |
14.80% |
15.11% |
2.08% |
- |
| Debtors Turnover Ratio (times) |
4.04 |
3.77 |
7.36% |
- |
Human Resource
The Company recognises the importance of having a talented and dedicated workforce. As
such, it invests heavily in equipping its employees with relevant skills to excel in their
respective fields of expertise. The Companys partnership- oriented human resources policy
goes beyond conventional compensation and performance reviews.
Employee Work-Life Cycle
Talbros evaluates its employees work-life cycle to ensure that they are productive and
motivated. The Company provides inputs that shape an enduring and fruitful career. This
approach enables Talbros to retain its employees and ensure that they have a fulfilling
and successful career with the Company.
Training and Development Programmes
The Company conducts various training programmes for its employees internally and
externally. These programmes aim to nurture employees into leadership positions and cover
specialised functions such as manufacturing, quality control, sales and marketing, and
information technology. The Company also provides opportunities for employees to attend
external training programmes and enhance their skills and knowledge.
Employee Retention
Talbros recognises that employee retention is key to the success of the Company. To
this end, the Company offers competitive compensation packages, employee benefits, and
opportunities for career growth. Talbros also fosters a positive work environment, where
employees feel valued and appreciated.
Internal Controls
The Company recognises the importance of having a robust internal control framework
that is commensurate with its size, scale, and complexity. The Companys Internal Audit
Department conducts comprehensive audits of functional areas and operations to ensure that
policies, procedures, statutory, and regulatory requirements are being followed.
Significant audit observations and follow-up actions are reported to the Audit Committee
on a quarterly basis. The Audit Committee reviews and evaluates the adequacy and
effectiveness of the Companys internal control environment and monitors the
implementation of audit recommendations. Talbros has implemented all recommendations of
the Audit Committee to ensure a strong internal control system.
The Board of Directors is responsible for ensuring that the Company has implemented
robust systems and frameworks of internal financial controls to provide reasonable
assurance regarding the adequacy and operating effectiveness of controls concerning
reporting, operational, and compliance risks.
Cautionary Statement
The statements in the Management Discussion and Analysis section describing
organisational objectives, projections, estimates and prediction may be considered as
forwardlooking statements. All statements that address expectations or projections about
the future, including, but not limited to, statements about the Companys strategy for
growth, product development, market positioning, expenditures and financial results, are
based on certain assumptions and expectations of future events. The Company cannot
guarantee that these assumptions and expectations are accurate or will be realised. The
Companys actual results, performance or achievement may thus, differ materially from
those projected in such forwardlooking statements. The Company assumes no responsibility
to publicly amend, modify or revise any forward-looking statement on the basis of any
subsequent developments, information or events. To avoid duplication and repetition,
certain heads of information required to be disclosed in the Management Discussion and
Analysis have been included in the Boards Report.
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