Automotive Stampings & Assemblies Ltd Management Discussions.


The Indian Automobile Industry is made up of Original Equipment Manufacturers (OEMs) i.e. Automobile manufacturers and auto component manufacturers.

Indian automobile industry is among the largest automobile industries across the globe. The Automobile Industry is a growing sector in India with global majors having set up their facilities here. The Industry has been continually evolving and absorbing newer technologies in order to align itself with global developments. Additionally, the Indian automobile industry is anticipated to observe major changes in the form of electric vehicles (EVs), shared mobility, Bharat Stage (BS)-VI emission and safety norms which significantly influence the growth of automobile industry in the country.

The Auto Components Industry in India comprises of Tier One manufacturers who supply complete component modules to OEMs, Tier Two manufacturers who cater to Tier One manufacturers and Tier Three manufacturers who supply components to Tier Two manufacturers. The Industry is divided into five segments viz. engine parts, transmission drive & steering parts, suspension & brake parts, electric parts and body & chassis. The fortunes of the Auto Components Industry are closely linked with those of the OEMs and must be agile to adopt the changes in technology. Apart from this, it has to continuously raise the quality and delivery performance in stride with the requirements of OEMs.

Auto component manufacturers would need to keep pace with the changing needs of automotive OEMs, who in turn are coping with the dynamic expectations of the end customer, consolidation of platforms to reduce complexity and Cost which includes constantly shifting market dynamics due to changing, customer demands and operating models and the changing needs of OEMs, who are likely to want different, more agile and just in time deliveries.

Indian auto industry has already been reeling under severe de-growth, and the pressure of disrupted supply chain only aggravated the situation. Auto industry has been under pressure due to a mix of demand and supply factors.

For the first time, in FY 2019-20, the Auto Industry witnessed a negative growth of 14.73 per cent. The Passenger Vehicle segment, which includes passenger cars, vans and utility vehicles, registered a negative growth of 14.76 per cent. Within this segment, while the Utility vehicle market grew at 2.29 per cent the Van segment and the Passenger Car segment recorded a negative growth of 38.49 per cent and 19.77 per cent respectively. The Commercial Vehicle segment also registered a negative growth of 32.40 per cent. Within the CV segment, the M&HCV segment registered a negative growth of 47.34 per cent and LCV segment registered a negative growth of 22.45 per cent. The Two wheeler segment registered a negative growth of 14.14 per cent and three wheeler segments registered a negative growth of 10.64 per cent also.

GDP growth of Indian economy is likely to be negative in FY 2020-21 as the outbreak of Coronavirus COVID- 19 has disrupted economic activities . (Source: RBI )

The chart given below shows the production of various categories of vehicles during FY2019-20 vis-a-vis FY2018-19.

Segment FY2019-20 FY2018-19

% Growth

Passenger cars 21,75,242 27,11,160 (19.77)
Utility vehicles 11,24,975 10,99,780 2.29
Vans 1,33,798 2,17,531 (38.49)
Passenger Vehicles 34,34,015 40,28,471 (14.76)
M&HCVs 2,33,979 4,44,356 (47.34)
LCV 5,18,043 6,68,049 (22.45)
Commercial vehicles 7,52,022 11,12,405 (32.40)
Three Wheelers 11,33,858 12,68,833 (6.46)
Two wheelers 2,10,36,294 2,44,99,777 (14.14)
Quadricycle 6,095 5,388 13.12
Total of All Categories 2,63,62,282 3,09,14,874 (14.73)
Source SIAM report

The Indian automobile industry has been going through a tough phase for a while now, with a slowing economy, changes in emission & safety regulations and many other challenges. The onset of COVID-19, and the extended lockdown to contain it, have only made things worse. The Indian Auto Components Ancillary Industry continues to face adverse headwinds to maintain volumes and margins. Your Company operates in Sheet Metal Components, Assemblies and Sub-assemblies segment of the Auto Components Industry. It manufactures a range of sheet metal components and assemblies for the Automobile Industry and is a Tier One auto components supplier.


During the period under review, your Company has four manufacturing facilities at Chakan Unit-1, Chakan Unit- 2, Pune (Maharashtra), Halol (Gujarat) and Pantnagar (Uttarakhand).

Your Company in FY 2018-19 has shifted manufacturing operations located at Bhosari in order to achieve operational efficiency and productivity improvements from G-71/2, MIDC, Industrial Area, Bhosari, Pune: 411026, Maharashtra, India to leased premises located at Survey No. 679/2/2, Alandi Road, Kuruli, Chakan, Taluka - Khed, District- Pune: 410 501, Maharashtra, India.

During the period under review, your Company has transferred leasehold rights in the land along with building located at G-71/2, MIDC, Industrial Area, Bhosari, Pune: 411026, Maharashtra to Fronius India Private Limited, M/s. Pradeep Sweet Icon and M/s Mittal Engineering Works respectively after obtaining necessary approvals from MIDC and concerned authorities.

Financial Year 2019-20 has been a challenging year with weakening macro-economic conditions, slowing market growths in Auto sector and finally, COVID-19 outbreak and containment measures towards the end of the year. The Ministry of Home Affairs, Government of India on March 24, 2020 notified the first ever nationwide lockdown in India to contain the outbreak of Covid-19 pandemic. The Financial Year 2019-20 ended with the pandemic situation created by the spread of the Corona virus COVID-19, all over the world and day to day life across the globe came to a virtual stop and your Company was not an exception. The operations were disrupted at all the manufacturing facilities of the Company. Your Company had to put a halt on its operations for some period during March, 2020 to May, 2020, caring more for the wellness and safety of its people and complying with Government and Health authorities advisories during lockdown.

The Company is taking all necessary measures in terms of mitigating the impact of the challenges being faced in the business. The Company is working towards being resilient in order to sail through the current situation. It is focused on controlling the fixed costs, maintaining liquidity and closely monitoring the supply chain to ensure that the manufacturing facilities operate smoothly.

Your Company operates its business in conformity with the highest ethical and moral standards and employee centricity. In view of the outbreak of the pandemic, your Company undertook timely and essential measures to ensure the safety and well-being of its employees at all its plant locations and office.

During the time of uncertainty Companys volunteers had worked aggressively to support your Company & community around Companys locations. Your Company took a number of measures to ensure effective management of the situation while continuing to serve community and customers effectively. Apart from this, your Company also provided the Local Administration / Corona Warriors with Touch free temperature measurement (Three Time in a day), Three number & color Face Masks, no touch Sanitizer Stations, no touch Drinking Water tabs, Face Shield, installation of Aarogya Setu App, Social distance marking at prominent locations, conducting awareness session, no visitor Policy, compulsory Medical report to join the duty, Quarantine area identification to support them in their tryst with this pandemic overall in the plants.

Majority of the employees were given the option to work from home during the lockdown period and a Task force of senior management ensured developing strategies and monitoring them for Business continuity activities. The Company observed all the government advisories and guidelines thoroughly and in good faith.

Your Companys sales during the year were impacted by lower volumes than expected in all segments considering various developments in auto sector like BS- VI norms transition, introduction of Electric Vehicles in Passenger Vehicle segment resulted into low inventory / production for all OEMs & which was further exacerbated by COVID-19 related lockdown in March, 2020. Some of the models under Passenger Car segment and Commercial Vehicles segment, on which your Company has heavy dependence, recorded drop in volume and this had an adverse effect on sales. Even though, the Utility Vehicle production recorded meager growth of 2.29 per cent, your Company couldnt achieve corresponding growth, since the major customer including anchor customer of your Company recorded a negative growth in all segments.

Sales of your Company did not grow as expected due to slower ramp up of new businesses and lower off-take from key customers. The capacity utilization of your Company was therefore low as compared to last year. During the financial year 2019-20, the manufacturing costs decreased due to reduced sales and change in product mix as compared to previous financial year 2018-19. However to minimize the impact, your Company has identified 5 EBITDA Pillars for various cost reduction initiatives to enhance productivity and improve operational efficiencies and Cross Functional Team is formed to regularly monitor the same. The Management is confident that the cost reduction initiatives and operational efficiencies are sustainable. Your Company has been aggressively managing its net working capital and was able to keep it under control.

Apart from the cost reduction programmes, your Company has been aggressively pursuing new business opportunities in Off- road, Commercial Vehicles, and Three Wheeler Segment by targeting greater share of business from existing and new Customers and ramp up of business in Utility Vehicle Segment. This will not only increase the sales but also will help to reduce the dependency on one segment resulting in reducing overall risk.

Your Company is focused on achieving volume growth, reduction in costs and improving product portfolio. These measures will continue to drive improvement in your Companys business.


During the year under review, the net Sales dropped by 24.73 per cent to Rs 36,224.42 Lakhs as compared to previous year primarily due to reduction in Customer volumes & lower off take from key Customers. Other operating revenue decreased from Rs 39.71 Lakhs to Rs 15.88 Lakhs. Other income of Rs 44.41 Lakhs mainly consists of gain on sale of assets of Rs 36.45 Lakhs and other non- operating income of Rs 7.96 Lakhs.

Cost of materials consumed (including change in stock) as a percentage to sales increased by 1.90 per cent to 77.03 per cent because of change in the product mix. In order to mitigate the impact, your Company is taking various cost reduction initiatives like negotiations with customers and vendors, blank optimisation, band tolerance, CTS (Cut to Size) to coil ratio, grade change, resourcing and change in the product mix. The Management has been taking continuous steps to improve material yield.

Employee benefits expense decreased by 8.12 per cent as compared to previous year due to changes in manpower requirements and outsourcing.

Other Expenses comprising Administration and Selling Expenses have decreased to Rs 5,836.07 Lakhs largely due to reduction in sales as compared to previous year & costs related to rent and leasing, logistic costs, freight and forwarding charges, rates and taxes, power and fuel, packing materials, machinery repairs and maintenance, consultancy fees etc. During FY 2019-20, Finance cost increased to Rs 1,748.27 Lakhs due to increased borrowings.

Your Company is taking various initiatives on productivity improvements and cost reduction Programmes.

Key Financial Ratios

Ratios 31.3.2020 31.3.2019 % change
1 Debtors Turnover 11.44 12.06 (5.15)
2 Inventory Turnover 20.19 26.92 (24.98)
3 Interest Coverage Ratio 0.67 0.83 (18.42)
4 Current Ratio 0.36 0.51 (30.05)
5 Debt Equity Ratio 9.03 6.98 29.28
6 Operating Profit Margin (%) (5.63) 0.80 (800.44)
7 Net Profit Margin (%) (4.69) (2.62) 79.07
8 Return on Net Worth (28.92) (30.39) (4.85)


1. Current ratio is decreased as compared to previous FY 2018-19 mainly due to reduction in inventories and trade receivables.

2. Increase in debt during FY 2019-20 as compared to previous FY 2018-19 resulted in higher debt equity ratio.

3. During the year under review, the net Sales dropped by 24.73 per cent to Rs 36,224.42 Lakhs as compared to previous year primarily due to reduction in Customer volumes & lower off take from key Customers. The capacity utilization of your Company was therefore low as compared to last year resulting in reduced operating profit margin and thus reduced net profit margin as well in FY 19-20 as compared to FY 18-19.