ABC Bearings Ltd Merged Management Discussions

a) Industry Structure and Development

The automotive segment in India consists of Passenger Cars, Utility Vehicles, Commercial Vehicles, Two Wheelers and Three Wheelers. Performance of Auto Industry during 2016-17 Production

The industry produced a total 25,316,044 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in April-March 2017 as against 24,016,599 in April-March 2016, registering a growth of 5.41% as compared to last year.

Domestic Production

The Automotive Industry is expected to continue with robust growth to become one of the largest in the world in the next decade.

The domestic tractor industry grew at healthy rate from 4.98 lacs to 5.78 lacs registering increase by 16.11%.

During 2016-17, the Industry continued with positive growth with Passenger Vehicle registering growth of 9.42% from 34.65 lacs vehicles to 37.91 lacs vehicles. Total Commercial Vehicle growth was 3% from 7.87 lacs to 8.10 lacs vehicles, however, the growth of Medium and Heavy Vehicles remaining flat at 3.42 lac vehicles.

The two wheeler industry grew at 5.84 % from 188.30 lacs vehicles to 199.29 lacs vehicles. The only segment to register negative growth was the three wheeler segment registering degrowth of 16.16% from 9.34 lac vehicles to 7.83 lac vehicles.

Exports

During 2016-17, overall automobile exports declined by 4.50%. While Passenger Vehicles and Commercial Vehicles exports registered a growth of 16.20% and 4.99% respectively, exports of Three Wheelers ,Two Wheelers and Tractors declined by 32.77% ,5.78% and 5.68% respectively.

Introduction of Bharat Stage IV vehicles, from 1st April, 2017 and GST from 1st July, 2017 have slowed down sales of vehicle especially commercial vehicles and tractors. Further growth is expected from second half of 2017-18.

Government Initiatives like Make in India, new automotive policy 2016-2026 and push in infrastructure segment for rural economy development will bring growth in economy in 2017-18.

To support automotive industry in the country, Automotive Research Association of India is expanding its research and development facilities to meet government regulation for introduction of Bharat Stage VI by 2020 along with new requirement of vehicle crash test. b) Opportunities and Threats Opportunities:

Indian automotive industry is emerging as one of the important markets and almost all the brands of car & commercial vehicle players in the world have opened their plants in the country, which will increase company’s opportunities in export markets. Government initiatives towards bringing more environmental friendly regulations in vehicles will bring more opportunities for fleet filling.

Threats:

At present the industry faces the following threats:

a. Increasing cost of manufacturing beyond the control of companies.

b. Increasing bargaining power of consumer, wanting continuous price reduction.

c. Volatility in fuel price.

d. Growth rate of industries is governed by Government policies.

e. Continuously increasing imports of bearings from low cost countries.

Your company has already taken the following steps to fight against the threats.

1. The Company has drawn five years long term rolling plan to capitalize the opportunities and counter measures to overcome the threats.

2. The Company has developed low torque, high capacity and value added products to counter above threats and the Company has applied for two patents bearings for steel mill and four wheel drive planetary gear box application in automotive segment.

3. Nonbearing segment will be introduced to enhance the product basket (Grease, Complete axle for trailer segment, Break shoe, etc.)

c) Segment-wise-performance

The Company has only one segment of activity namely ‘Bearings’ as defined by Accounting Standard-17 of Institute of Chartered Accountants of India and as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the

Companies (Accounts) Rules, 2014.

d) Outlook

Key economic indicators are encouraging and with the forecast of above normal monsoon, the outlook is positive.

e) Environment & Sustainability

Towards fulfilling our responsibility for the environment, the company continuously works for reducing the impacts on environment. Various initiatives like revisiting the manufacturing process for minimizing the waste generation, minimizing the consumption of natural resources, coolant recovery from grinding dust, reduction of energy consumption by using energy efficient lightings, Implementation of reusable packaging systems are under taken for environmental protection.

As an integral part of Environmental Management System ISO 14001:2004, the Company measures and monitors the key environmental parameters like water consumption, effluent discharge, gas emission, electric consumption etc. and improves every year in these parameters.

The management extended the environmental responsibility throughout entire supply chain, moving one step ahead towards the Company’s one of the environmental objectives, minimizing the consumption of natural resources, during the year 2016-17 joint efforts with the suppliers. The Company minimized the use of input material through supplier’s process optimization. The Company designs lighter bearings keeping the load carrying capacity same as previous which helps customer to improve energy efficiency. The Company designs and manufactures the bearings with higher load rating within the existing boundary dimensions which gives longer service life or allows customer to use down sized bearings for same application.

f) Internal control systems and their adequacy

The Company has strong internal controls which enable it to comply with the policies, procedures, standard guidelines and laws to help protect its assets against financial losses. The Audit Committee comprising of Independent Directors regularly review the financial and risk management policies, monitors control procedures, review key audit findings and recommend measures to improvise risk mitigation plan concerning the business of the Company. The scope of work for the Internal

Auditors is designed in the manner that they review the processes and transactions on periodic basis, discuss their findings with the operating management and make recommendations which are submitted to the Audit Committee. The Senior Management Team carries out monthly reviews to assess the internal control environment and their adequacy concerning the business and environment and make recommendations. We believe that these internal control systems provide among other things, a reasonable assurance that transactions are executed with management authorization and that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles.

g) Financial performance with respect to operations

The total income for the year was Rs. 210.68 crores as compared to Rs. 201.25 crores for previous year. Commercial vehicles showed modest growth of 3% and Tractor Industry showed positive growth.

Profit before exceptional item and tax was Rs. 14.17 crores for the year 2016-17 as compared to Rs. 8.38 crores in previous year. There is improvement at operating levels on account of increase in sales.

h) Human Resources and Industrial Relations

The Company has started regular training with scientific way as a whole from the last year. It was decided that every employee should give at least eight hours training during financial year. The Company started with skill gap analysis to make the training more job oriented and to achieve business goals. Based on skill gap, common training subject was devised. The company has planned two days training per month. One batch of employees will consist of 25 to 35 employees. Each employee will be pre assessed by third party trainer and thereafter the training will commence.

The Company also carried out programmes like technical know-how problem solving, 7QC Tools, Kaizen, 5-S etc. Information sharing and changes in process is being done continuously.

Last year overall 2432 man hours have been spent for Operational Excellence foundation, Quality management, labour laws, building positive attitude, soft skill, flow management and so on.

	For and on behalf of the Board
Place : Mumbai	S. M. PATEL
Date : 4th August, 2017	Chairman
	DIN : 00012036