Automobile Corporation Of Goa Ltd Management Discussions

Indian Economy Overview:

Indias strong economic growth in the first quarter of FY23 enabled it to surpass the UK, becoming the fifth-Largest economy as it recovered from the COVID-19 pandemic. The nominal GDP for 2023-24 is projected at Rs. 293.90 lakh crores (US$ 3.52 trillion), up from the Rs. 269.50 lakh crores (US$ 3.23 trillion) in 2022-23. This represents a 9.1% growth in nominal GDP for 2023-24, compared to 14.2% in 2022-23. The key drivers of this growth are strong domestic demand for consumption and investment, alongside the governments continued emphasis on capital expenditure.

In the January-March 2024 period, Indias exports reached US$ 119.10 billion, with Engineering Goods (25.01%), Petroleum Products (17.88%), and Organic and Inorganic Chemicals (7.65%) being the top three exported commodities. Rising employment and increasing private consumption, buoyed by rising consumer sentiment, are expected to support GDP growth in the coming months.

Government capital spending is anticipated to be bolstered by factors such as tax buoyancy, a streamlined tax system with low rates, a thorough assessment and rationalization of the tariff structure, and the digitization of tax filing. Over the medium term, increased capital spending on infrastructure and asset-building projects is expected to enhance growth multipliers. The contact-based services sector also shows promise, driven by pent-up demand and supported by various high-frequency indicators signaling recovery.

India has emerged as the fastest-growing major economy globally and is expected to become one of the top three economic powers in the next 10-15 years, underpinned by its robust democracy and strong partnerships. Amid global economic uncertainty and volatility, Indias appeal as an investment destination has grown stronger, evidenced by the record amounts raised by India-focused funds in 2022, showcasing investor confidence in the "Invest in India" narrative.

Key Economic Developments in Recent Times:

• India, driven primarily by domestic demand, has seen consumption and investments contribute to 70% of economic activity. As the economy recovers from the COVID-19 shock, several sectors have witnessed significant investments and developments.

• According to the HSBC Flash India PMI report, business activity surged in April 2024 to its highest level in about

14 years, with the composite index reaching 62.2. This indicates continuous expansion since August 2021, along with positive job growth and reduced input inflation, affirming Indias status as the fastest-growing major economy.

• As of April 2024, Indias foreign exchange reserves stood at US$ 643.162 billion.

• In 2023, India attracted US$ 49.8 billion in PE-VC investments.

• Merchandise exports in March 2024 totaled US$ 41.68 billion, with total merchandise exports reaching US$ 437.06 billion from April 2023 to March 2024.

• India was ranked 40 th out of 132 economies in the Global Innovation Index 2023, climbing from 81st position in 2015. It ranks third globally in the number of scientific publications.

• In March 2024, gross Goods and Services Tax (GST) collection was the second highest on record at Rs. 1.78 lakh crore (US$ 21.35 billion).

• Between April 2000 and December 2023, cumulative FDI equity inflows to India stood at US$ 971.52 billion.

• In February 2024, the overall Index of Industrial Production (IIP) stood at 147.2, with indices for the mining, manufacturing, and electricity sectors at 139.6, 144.5, and 187.1, respectively.

• According to the Ministry of Statistics & Programme Implementation (MoSPI), Indias Consumer Price Index (CPI) based retail inflation reached 5.69% in December 2023.

• Foreign Institutional Investors (FII) inflows between April and July 2023-24 were nearly Rs. 80,500 crore (US$ 9.67 billion), while Domestic Institutional Investors (DII) sold Rs. 4,500 crore (US$ 540.56 million) during the same period. Foreign Portfolio Investors (FPIs) invested US$ 8.06 billion in India from January to April 2024.

Outlook:

The automobile industry is dependent on various factors such as the availability of skilled labour at low cost, robust R&D centres, and low-cost steel production. The industry also provides great investment opportunities like direct and indirect employment to skilled and unskilled labour. The electric vehicles industry is likely to create five crore jobs by 2030.

Addressing the automotive industrys needs, MHI has extended the tenure of the Production Linked Incentive (PLI)

Scheme for Automobile and Auto Components by one year, offering incentives for determined sates over five consecutive financial years from 2023-24 to 2027-28, with disbursement occurring in the subsequent financial year. The scheme has proven successful, attracting proposed investments of US$ 8.1 billion (Rs. 67,690 crore) against the target estimate of US$ 5.1 billion (Rs. 42,500 crore) over five years, with US$ 1.6 billion (Rs. 13,037 crore) already invested by December 2023.

Automotive Industry Snapshot

• Rising middle-class income and a huge youth population will result in strong demand.

• In January 2024, the total production of passenger vehicles*, three-wheelers, two-wheelers, and quadricycles was 23,28,329 units.

• The global EV market was estimated at approximately US$ 250 billion in 2021 and by 2028, it is projected to grow by 5 times to US$ 1,318 billion.

• India could be a leader in shared mobility

by 2030, providing opportunities for electric and autonomous vehicles.

• Focus is shifting to electric vehicles to reduce emissions.

• By 2030, the Indian government has committed that 30% of the new vehicle sales in India would be electric.

• • India is on track to become the largest EV market by 2030, with a total investment opportunity of more than US$ 200 billion over the next 8-10 years.

• The automobile sector received a cumulative equity FDI inflow of about US$ 35.65 billion between April 2000 - December 2023.

• The Automotive Mission Plan 2016-26 is a mutual initiative by the Government of India and the Indian automotive industry to lay down the roadmap for the development of the industry.

• The FAME Scheme was extended for a further period of 2 years up to March 31st, 2024.

Indian Economy Growth Rate & Economic System Insights : IBEF

GOVERNMENT INITIATIVES

Over the years, the Indian government has introduced several initiatives to strengthen the nations economy. Policies such as Make in India, Start-up India, Digital India, the Smart City Mission, and the Atal Mission for Rejuvenation and Urban Transformation are designed to create significant opportunities within India. These programs aim to bolster financial stability for citizens and contribute to overall economic growth. Indias rapid economic growth has also led to a substantial increase in its demand for exports, further supporting the countrys economic expansion.

• The Government of India encourages foreign investment in the automobile sector and has allowed 100% FDI under the automatic route. Some of the recent initiatives taken by the Government of India are:

• In January 2024, the Ministry of Heavy Industries extended the tenure of the Production Linked Incentive (PLI) Scheme for Automobile and Auto Components by

one year. The incentive will now be applicable for a total of five consecutive financial years, until March 2028.

• Ministry of Heavy Industries (MHI) officials revealed that India plans to launch a new scheme to incentivize electric vehicle purchases and improve charging infrastructure, aligning with the interim budgets focus on eco-friendly transportation. Also, the allocation of US$ 321.5 million (Rs. 2,671.33 crore) for 2024-25 is expected to be utilized by March 31, 2024.

• Under phase-II of FAME India Scheme, subsidy amounting to US$ 696.8 million (Rs. 5790 crores) has been awarded to EV manufacturers on sale of 13,41,459 number of electric vehicles till January 2024.

• The FAME Scheme was extended for a further period of 2 years up to March 2024.

• In January 2023, under the FAME-II scheme, the Centre approves US$ 97.77 million (Rs. 800 crore) for 7,432 public fast charging stations.

With the economic revival, post the Pandemic (Covid-19)

your Company have shown staggering growth in terms

of revenue and profits due to operational leverages. With

the Government initiative, growing demands, tapping the opportunities in electric vehicle (EV) segment in achieving the zero emission goat, the industry has a positive growth outlook.

References: International Organization of Motor Vehicle Manufacturers, Media Reports, Press Releases, Department for Promotion of Industry and Internal Trade (DPIIT), SIM.in

Automotive Component Manufacturers Association of India

(ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2023-24, ibef.org

Indian Economy Growth Rate & Economic System Insights : IBEF

Market Size

Automobile Production Trends: -

Category	2018-19	2019-20	2020-21	2021-22	2022-23	2023-24
Passenger Vehicles	40,28,471	34,24,564	30,62,280	36,50,698	45,87,116	49,01,844
Commercial Vehicles	11,12,405	7,56,725	6,24,939	8,05,527	10,35,626	10.66,429
Three Wheelers	12,68,833	11,32,982	6,14,613	7,58,669	8,55,696	9,92,936
Two Wheelers	2,44,99,777	2,10,32,927	1,83,49,941	1,78,21,111	1,94,59,009	2,14,68,527
Quadricyctes	5,388	6,095	3,836	4,061	2,897	5,006
Grand Total	3,09,14,874	2,63,53,293	2,26,55,609	2,30,40,066	2,59,40,344	2,84,34,742

Automobile Domestic Sales Trends: -

Category	2018-19	2019-20	2020-21	2021-22	2022-23	2023-24
Passenger Vehicles	33,77,389	27,73,519	27,11,457	30,69,523	38,90,114	42 18,746
Commercial Vehicles	10,07,311	7,17,593	5,68,559	7,16,566	9,62,468	9,67,878
Three Wheelers	7,01,005	6,37,065	2,19,446	2,61,385	4,88,768	6,91,749
Two Wheelers	2,11,79,847	1,74,16,432	1,51,20,783	1,35,70,008	1,58,62,087	1,79,74,365
Quadricyctes	627	942	-12	124	725	725
Grand Total	2,62,66,179	2,15,45,551	1,86,20,233	1,76,17,606	2,12,04,162	2,38,53,463

Automobile Exports Trends

Category	2018-19	2019-20	2020-21	2021-22	2022-23	2023-24
Passenger Vehictes	6,76,192	6,62,118	4,04,397	5,77,875	6,62,891	6,72,105
Commerciat Vehictes	99,933	60,379	50,334	92,297	78,645	65,816
Three Wheeters	5,67,683	5,01,651	3,93,001	4,99,730	3,65,549	2,99,977
Two Wheeters	32,80,841	35,19,405	32,82,786	44,43,131	36,52,122	34,58,416
Quadricyctes	4,400	5,185	3,529	4,326	2,280	4,178
Grand Total	46,29,049	47,48,738	41,34,047	56,17,359	47,61,487	45,00,492

Source: SIAM.IN COMPANY PERFORMANCE

Your Companys Sates (with other income) for the financial year 2023-24 was Rs 59,765 lakhs as against Rs. 51,415 lakhs (net of taxes) in the preceding financial year. The Companys Profit before tax during the financial year 2023- 2024 was at Rs.5,107 lakhs (after exceptional income and before other comprehensive toss) as against profit of Rs.3,712 lakhs in the preceding financial year. Net profit after tax stood at Rs. 3,742 lakhs as compared to a profit of Rs. 2,630 lakhs in the preceding financial year. During FY 2023-24, your Company sold 6511 buses.

The Policy on the Emission Norms, Road & infrastructure, Electric Vehicles, Bus Body Code, Urbanization & City Developments, Electrification & Gasification (CNG & LNG) of Bus City Transit and PPP model of Urban & Sub Urban stage bus operation and Scrappage policy would stimulate the demand in next few years.

Segment Overview

The bus segment has maintained its dominance in contributing to your companys revenue and profit. Proportion of bus divisions revenue in the total revenue of the company clocked 87% during the year under review. Large portion of our workforce is operating in the bus segment at Goa. Revenue from Bus and Pressing segment has grown sharply as compared to last year mainly due to increase in demand for the the commercial vehicle passenger segment

1. Segment Review and Developments

A. BUS SEGMENT

Revenue from product sales in Bus Segment increased by 17.09% at Rs. 51,115 lakhs (excluding taxes and other income) in FY 2023-24, as compared Rs. 43,655 lakhs in the preceding financial year. in FY 2023-24, 6511 buses were sold as compared to 5715 buses in preceding financial year which was an increase of 796 buses. Out of the 6511 buses sold during the financial year 2023-24, 2347 buses were towards Export Application which has increased by 63% during the current year.

B. PRESSING SEGMENT

Sheet metal business follows the cyclicity of OEMs business for which your company is a key supplier. The segment is necessarily capital intensive and capacity utilization drives the profitability in this segment. Revenue from product sales (excluding taxes and other income) from this segment has increase from Rs 6,782 lakhs (excluding taxes and other income in FY 2022-23), to Rs 7,306 lakhs in the given financial year because of increase in the demand of components due to recovery in the demand of Commercial Vehicles.

2. Technology Initiatives

Your Company is concentrating on building product and technical capabilities by enhancing its design processes using modern methodologies. We continuously benchmark our products against competitors offerings, ensuring we provide the best value proposition to our customers.

3. Entry into New segment

Your Company is making efforts to gain entry into bus body manufacturing of electric buses which would be the future technology in passenger mobility.

Your Company was able to develop new models in school and staff segment meeting new regulatory norms to meet market expectations and to diversity in its product offerings.

4. Awards, Certification & Recognition

Your Company is accredited with IATF 16949 QMS Certification for its Goa, Jejuri and Dharwad Plants.

5. Risks, Opportunities and Threats Risks and Concerns

in order to build capacity & capability for future, your Company need to upgrade its old infrastructure and induct machinery and equipment to support new technology products like EV.

Your Company has made infra upgradation plan and implementing the same in financial year FY24 & FY25.

In todays digital age, cyber security has emerged as a critical area of concern for all organizations, including ours. The rapid advancements in technology, coupled with an increasingly interconnected world, have brought about significant benefits. However, they have also introduced complex security challenges that we must address proactively.

Your Company is in the process of upgrading its infrastructure and security framework, along with conducting regular security audits and vulnerability assessments to mitigate the cyber threats.

Opportunities

With governments increased focus on development of infrastructure including highways and Electric mobility, there would be an opportunity for growth in commercial vehicles and mass transportation solutions.

Your Company is working on product up-gradation to meet market requirement by diversifying its product range in school, staff and EV segment with new contemporary designs.

Threats

The Company continues to face similar challenges this year. The presence of multinational companies in the Electric Vehicle sector, along with various partnerships between local bus body builders and foreign collaborators, could impact domestic OEMs, particularly in the emerging Electric Bus market.

Additionally, the GST disparity between fully built vehicles and separately supplied bus bodies is creating obstacles for the growth of OEM-supplied bus bodies.

To counter these challenges, the Company is focusing on product diversification to enhance value addition and sales. This strategy aims to achieve economies of scale, thereby improving the apportionment of fixed costs.

6. Internal Control System

The Company has adequate internal control systems in place and also has reasonable assurance on authorizing, recording and reporting transactions of its operations in all material respects and on providing protection and safeguard against misuse or loss of assets of the Company. The Company has in place, well documented procedures covering financial and operational functions commensurate with the size and complexities of the organisation. Some of the salient features of the internal control system in place are: -

I. Following statutory and applicable Accounting Standards and Policies.

II. Preparation of annual budget for operation functions and d monitoring the same with actual performance at regular intervals.

III. All assets are properly recorded and procedures have been put in place to safeguard against any loss or unauthorized use or disposal.

IV. Internal audit department carries out periodic audit at all locations and functions.

V. The observations arising out of internal audit are periodically reviewed at the Audit Committee meetings along with follow up action.

VI. Periodic presentations are made to the Audit Committee on various operational and financial risks faced by the company and action plans to mitigate the same.

VII. Company has implemented system of Internal Financials Controls over Financial Reporting (ICoFR) and formed a three-member team for the continuous assessment.

VIII. Statutory Auditors of Company have conducted Test of Design (TOD) and Test of Effectiveness (TOE) under the purview of Internal Financial Controls over Financial Reporting (ICoFR) and found same operating effectively.

7. Financial and Operational Performance

Companys Total Revenue including Other Income (Excluding taxes) stood at Rs 59,765 lakhs, as against Rs 51,415 lakhs in the previous year. Correspondingly, profit before tax (after OCI and exceptional item) is Rs 4,980 lakhs as compared to profit of Rs 3,505 lakhs (after exceptional income of Rs 297 lakhs related to fire incident claim at Plant-1) in the last financial year. Earnings per equity share is Rs 63.02 as compared to Rs. 45.73 in the last financial year.

Financial and Operational Performance:	Percentage of Sales
Particulars	Year ended 31st March
	2024	2023
Total Income (excluding taxes & including Other Income)	100	100
Expenditure:
Material (Including change in stock)	68.17%	69.48%
Employee cost	8.05%	9.12%
Manufacturing Expenses	14.39%	13.84%
Total Expenditure	90.61%	92.44%
Profit before Interest, Depreciation, Exceptional Items, Tax and OCI	9.39%	7.56%
Depreciation	0.83%	0.91%
Finance Cost	0.01%	0.02%
Profit before exceptional Item, OCI and Tax	8.55%	6.63%
Exceptional item	0.00%	0.58%
Financial and Operational Performance:	Percentage of Sales
Particulars	Year ended 31st March
	2024	2023
Profit before tax before OCI	8.55%	7.21%
Provision for Tax (net) before OCI	-2.12%	-1.80%
Other Comprehensive Loss (net of taxes)	-0.16%	-0.30%
Profit After Tax after OCI	6.27%	5.11%

8. Human Resources

The Companys innovative human resource management strategies supported its business growth in a challenging environment. The focus has been to create an environment

where performance is rewarded, individuals are respected and employees get opportunities to realise their potential.

The employee cost reduced to 8.05% of total revenue (net of taxes) notwithstanding mainly due to increase in sates value. The strength of permanent employees reduced to 452 as on 31st March 2024 against 462 on 31st March 2023. Industrial Relations with staff and workmen across the Plants at Goa, Jejuri and Dharwad continue to be cordial.

9. Financial Ratios

The Key Financial ratios of the company are given betow with explanation in case of significant changes:

	2023-24	2022-23
NS Type of Ratio	Ratio	Ratio	% Change	Reason for variance
(a) Current ratio	2.21	2.06	7%	No significant change as per the guidance given
(b) Debt-equity ratio	0.28	0.37	-24%	by Institute of Chartered Accountant of India.
Debt service/Interest service (c) .. coverage ratio	661.43	507.60	30%	There is an increase in EBITD before OCI and exceptional expense due to operating leverage as there is an increase in contribution on account of increase in sales without significant increase in fixed expenses.
(d) Return on equity ratio	0.19	0.15	21%	No significant change as per the guidance given
(e) Net profit ratio	0.07	0.06	19%	by Institute of Chartered Accountant of India.
(f) Inventory turnover ratio	11.72	11.17	5%
() Trade receivables (Debtors) g turnover ratio	7.24	6.45	12%	No significant change as per the guidance given
(h) Trade payables turnover ratio	7.00	6.95	1%	by Institute of Chartered Accountant of India.
(i) Net capital turnover ratio	3.42	3.58	-5%
(.) Return on capital employed / j Return on net-worth	18.23%	12.91%	41%	There is an increase in EBIT before OCI and exceptional expense due to operating leverage as there is an increase in contribution on account of increase in sales without significant increase in fixed expenses.
(k) Return on investment	7.26%	6.08%	20%	No significant change as per the guidance given by Institute of Chartered Accountant of India.
(l) Operating profit margin (%)	6.46%	5.18%	25%	There is an increase in operating profits due to operational leverage as there is an increase in contribution on account of increase in sales without significant increase in fixed expenses.

Cautionary Statement

Statements in this Management Discussion and Analysis and Directors messages describing the Companys objectives, expectations and predictions may be forward-looking statements within the meaning of applicable securities taws and regulations. Actual results coutd differ materially from those expressed or implied. Important factors that coutd make a difference to the Companys operations include raw material availability and prices, demand and pricing by the Companys major customers, changes in the Government regulations, Tax regimes, economic developments and other incSA idental factors.