Auto Pins (I) Management Discussions


MANAGEMENT DISCUSSIONS & ANALYSIS REPORT

India has emerged as one of the fastest growing economies in recent times. The global growth prospects also look positive with the main economies gradually ascending the growth ladder. It requires expertise, in terms of technology, design and providing customer satisfaction. It potential and market is huge; however only companies who would be able to provide good quality products at most competitive price will survive. The Companys brand has emerged as brand for reliability and has been able to win the customer loyalty in all these years. The Company will continue its successful stint in the industry, through providing good quality products at most reasonable prices and complete customer satisfaction by its strong distribution and service network.

ECONOMIC OVERVIEW

Global Economy

India has become the fastest-growing economy in the world in recent years. This fast growth, coupled with rising incomes, a boost in infrastructure spending and increased manufacturing incentives, has accelerated the automobile industry. The two-wheeler segment dominated the automobile industry because of the Indian middle class, with automobile sales standing at 19.45 million units in FY23.

Significant demand for automobiles also led to the emergence of more original equipment and auto components manufacturers. As a result, India developed expertise in automobiles and auto components, which helped boost international demand for Indian automobiles and auto components. Hence, the Indian automobile industry has a considerable impact on the auto component industry.

India s auto component industry is an important sector driving macroeconomic growth and employment. The industry comprises players of all sizes, from large corporations to micro entities, spread across clusters throughout the country. The auto components industry accounted for 2.3% of

India s GDP and provided direct employment to 1.5 million people. By 2026, the automobile component sector will contribute 5-7% of Indias GDP. The Automotive Mission Plan (2016-26) projects to provide direct incremental employment to 3.2 million by 2026.

The industry is a leader in exports and provides jobs to over 3.7 crore people. From FY16-FY22, the industry registered a CAGR of 6.35% and was valued at US$ 56.50 billion in FY22. The auto component industry exported US$ 19 billion and imported US$ 18.3 billion worth of components in 2021-22, resulting in the highest export surplus of US$ 700 million. The component sales to OEMs in the domestic market grew by 46% to US$ 27.27 billion (Rs. 2.23 lakh crore).

Due to the high development prospects in all vehicle industry segments, the auto component sector is expected to see double-digit growth in FY22. The industry is expected to stand at US$ 200 billion by FY26.

Indian Economy

The automobile sector is a key driver of India s economic growth. In December 2022, India became the 3rd largest automobile market, surpassing Japan and Germany in terms of sales. In 2021, India was the largest manufacturer of two-wheeler and three-wheeler vehicles and the world s fourth-largest manufacturer of passenger cars. The sector s importance is gauged by the fact that it contributes 7.1 per cent to the overall GDP and 49 per cent to the manufacturing GDP while generating direct and indirect employment of 3.7 crore at the end of 2021. {Source: Society of Indian Automobile Manufacturers (SIAM)}

The automotive industry is expected to play a critical role in the transition towards green energy. The domestic electric vehicles (EV) market is expected to grow at a compound annual growth rate (CAGR) of 49 per cent between 2022 and 2030 and is expected to hit one crore units annual sales by 2030. The EV industry will create 5 crore direct and indirect jobs by 20306 . To support and nurture this development, the government has undertaken multiple steps Source: Ministry of Heavy Industries

Despite the upbeat outlook, the automotive industry faces certain challenges. Higher borrowing costs and tempering global demand are expected to be near-term hurdles. Amongst structural issues, the increase in long-term third-party vehicle insurance premiums has increased the total upfront insurance cost by about 10-11 per cent, especially for two-wheelers. Therefore, the two-wheeler segment is the most affected and witnessed the lowest sales in the last ten years. Addressing these challenges will boost the automobile industry.

Outlook

The IMF revised its global GDP with a downward prediction for 2022 and 2023 to 3.6%, due to the risks of Russia-Ukraine conflict, rising inflation, and global supply chain bottle necks. In terms of combating the COVID-19 pandemic, the world is now not only cautious but also better prepared after weathering the disruptions of the last two years, and thus, the impact of the pandemic seems limited. However, to emerge from this slump, there is a need for collaborative action to address the ongoing geopolitical tension, focus on handling the supply chain disruptions while managing debt levels and inflation. 15 industries, a credit guarantee programme for SMEs, and increased infrastructure spending. The government announced a higher capex spending in the Budget goals for FY2022-23, up 35.4% from 5.54 lakh crore in FY 2021-22 to 7.5 lakh crore in FY 2022-23, which will have a multiplier impact in revitalising the economy. With all these measures of macroeconomic stability, India is prepared to meet the challenges and maintain robust growth in the coming year.

RISK AND CONCERNS

Future strategies of the auto companies will have to focus on increased environmental safety concerns, rising fuel prices and cost-effectiveness in the rising market competition. Innovation has to focus on increasing efficiency and reducing emissions. Customer experience will be a key factor to retain the existing ones and reach out to the new ones. After-sales service is an important aspect which will help in winning the loyalty of the consumer.

THREATS

o Economic downturn or slowdown can lead to decreased volumes and capacity utilization.

o Continued threat of raw material price volatility translating into pressure on margins during a rapid increase in raw material prices.

o Week currency resulting in pressure on margins.

o Any change in the government policy or its budgetary allocation to the infrastructure sector will have a major impact on Companys business.

o Change in the tax structure of Sales Tax, Entry Tax, Service Tax, VAT, GST etc. o Increasing competition from National and International players. o Unforeseen business losses

WORKING CAPITAL MANAGEMENT

Your Company practices prudent working capital management, methodologies and adequate planning for managing its day-to-day requirements of working capital funds. The Company focuses on timely receivables, realizations, and low inventory level considering JIT supply to customers which helps in reducing the working capital requirement. The funds are borrowed from Banks to bridge the working capital gap on weekly basis to avoid fixed liability of interest.

HUMAN RESOURCE MANAGEMENT

The Company believes that its employees are the most valuable assets. It encourages passion, commitment, innovation and meritocracy, and this has enabled the company to sustain its leadership position. The Company is focused not only in attracting but also in retaining talented individuals across

Company s business units. It does this by ensuring that the employees professional growth is consistent with their aspirations, and also within the framework of the corporate goals.

During the period under review, the Company maintained cordial relationship with all its employees. The Directors would like to acknowledge and appreciate the contribution of all employees towards the performance of the Company.

THREATS AND CHALLENGES

India being one of the most important engine driving world economies, the automotive industry has been subject to globalization in the Western world for a long time now. Need for high resource commitments, nature of the industry (scale sensitivity), the current stage in the industry s lifecycle, increasing competition and declining unit product margins have forced automobile manufacturers to merge, form alliances, or co-operate in the fields of R&D, marketing and distribution.

Automobile industry is very specific industry, thus it has higher level of entry barriers. For an example factory facilities, machinery, labor, technology are heavily involved. So following factors are considered to be the prime barriers for to the industry.

YOUR COMPANY PERFORMANCE

Your Company s performance for the year has been satisfactory. While sales have grown irrespective of non-performing loans across the banking system, especially the public sector banks and profitability of the Company is also better due to better utilization of resources. Further, exports too were higher on account of increase in sales and foreign exchange policies. This is best seen by a quick look at the financials.

FUTURE OUTLOOK

The long-term outlook remains positive for the automotive industry with all major global players having a base in India for manufacturing, global sourcing as well as engineering. Correction in fuel prices and lower finance cost should further add domestic growth in the short to medium term. Regular product launches planned by OEMs will keep customer excitement levels up and create demand and is favourable for overall industry growth.

FORWARD LOOKING STATEMENTS

Investors are cautioned that statements in this management discussion and analysis describing your

Company s objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied.

Important developments that could affect your Company s operations include a downtrend in the automobile industry global or domestic or both, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relation and interest costs.

PERFORMANCE EVAULATION CRITERIA OF INDEPENDENT DIRECTORS

1) Attending Board/Committee Meetings.

2) Going through the agenda papers and providing inputs in the meetings of Board/ Committees.

3) Guidance to the Company from time to time on the various issues brought to their notice.

4) Discharge of duties as per Schedule IV of the Companies Act, 2013 and compliance to other requirements of the said Act or other regulatory requirements.

Moreover, the performance evaluation is also based on the terms as specified in the Nomination and Remuneration Policy.

By Order of the Board of Directors

For AUTO PINS (INDIA) LIMITED

Place: Delhi
Date: 29.08.2023 Sd/-
RAJBIR SINGH
MANAGING DIRECTOR
DIN: 00176574