Banco Products (India) Ltd Management Discussions

"Management Discussion and Analysis Report"

Banco Products (India) Ltd. is a leading designer and manufacturer of engine cooling modules for automotive, off-highway and industrial applications. We deliver our best by combining innovation and product applica tion engineering to develop products which deliver high performance solutions for our customers in OEM an d aftermarket segments. The Company maintains the status of strategic supplier-partner to various esteemed Original Equipment Manufacturers for the development of new products wherein cooling systems and cooling modules fall into the category of proprietary parts.

Our Product(s):

Engine Cooling Modules such as Radiators, Charged Air Coolers, Fuel Coolers, Oil Coolers for various applications, AC Condensers, De-Aeration Plastic tanks, Metal Layered Gaskets and Elastomeric Moulded gaskets for static sealing applications.

Product Application(s):

Engine Cooling Modules and Gaskets are considered to be integral for efficient performance of Internal Combustion Engines (ICEs) as well as for EV systems (EVs) with wide ranging applications such as Passenger Cars, Light Commercial Vehicles, Medium and Heavy Commercial Vehicles, Agricultural Tractors, Harvesters, High Performance Bikes, Construction Machineries, Material Handling equipment, Mining machinery, Diesel Generators and Power Generation Equipment, Traction Rail Locomotives and Air Compressors.

Our Market(s):

OEM: We design and develop efficient cooling modules for OEM customers from wide range of various industries. With a growing successful record of accomplishments and long-term relationships with our key customers, we aim to nurture our strengths to become the preferred supply partner to OEMs in all off-road and industrial segments by offering innovative thermal solutions.

Aftermarket:

We meet growing service demand in the automotive aftermarket through our extensive distribution network which is spread across India. With a consistent growth in our offering ranges across new models and related thermal products by observing and following changing market trends and customer demands, we aim to grow, strengthen and sustain the Banco brand.

Exports:

Banco Products continues to develop a comprehensive service range of cooling products for global aftermarket and OEM customers. We have established our status as a supplier with a wide range of global OEM contracts which allow us to service in advanced markets with an aim of securing long-term business partnerships.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Transformation in emission norms, legislation and market trends in the Industrial and Automotive sectors has had a significant influence on your companys business. The Engine Cooling supplier vendor base is large ly dominated by multinational corporations or joint ventures both in India and abroad. Globally, OEM customers outside automotive industry are having increasing preference to develop suppliers based out of low cost countries like India.

The industry is rapidly changing in terms of its size and technologies. Indian OEM industry for off-highway is in the process of developing CPCB IV and Stage V emission regulatory norms which are likely to be implemented by the end of the year 2024. We strive to provide cooling solutions for a complete range of vehicles and machines in this segment. The diverse range of product programs are very wide for each OEM wherein quick development solutions are needed.

Demand development:

The demand development of your companys products and services is directly dependent on the development in the user industries. Investment towards increasing production capacity and adopting new age technologies, both for handling additional business volume changes as well as product diversity remains to be the norm.

Automotive:

Developments in the Indian automotive industry during the last year have been positive as witnessed in the quantum of vehicles sold. Government spending on infrastructure projects is massively up spurring sa les of construction machinery and commercial heavy duty trucks. OEMs are increasing the rate of introduction of new models to stay ahead of competition.

Agriculture:

The Indian Government has been supporting accelerated development of agriculture sector with higher grain support prices which has stimulated demand for tractors and combined harvesters.

Industrial:

Demand is increasing in all sectors due to faster pace of GDP growth and government spending on roads and launch of large infra projects resulting in downstream demand for power generation equipment, mining machinery etc.

OUR BESPOKE ENGINEERING APPROACH:

We invest into our resources to develop relevant products for a wide range of applications. Banco Products offers quick and customised solutions to meet cost targets as well as meeting assorted technical and performance requirements. With this approach, we co-create the best-in-class solutions which are efficient and deliver very reliable performance under challenging operating environments. Process of development of better designs is by taking inputs from actual users in field conditions and employing advanced IT-driven solutions.

Electric Vehicles (EVs):

The development of Electric Vehicles (EVs) in India is picking up; but further progress will be driven by cost of batteries and advancement downstream in the charging network facilities. In particular, two wheeler industry, passenger car and bus industry have shown some progress towards the development of Electric Vehicles (EVs). Cooling systems do play an important role in the functioning of Electric Vehicles (EVs). Various ongoing projects are under the development stages.

Banco New Energy Cooling Systems Limited (BNCL) is a wholly owned subsidiary of Banco Products (India) Limited which was formed to cater to and address the cooling system needs of electric vehicles (EVs) and alternative energy fuel systems.

It has commenced commercial production of its products namely Heat exchangers for Locomotives at its plant situated at Block No. 1329, Taluka Jambusar, Village Anki, Bharuch, Gujarat-392150 on 12th October, 2023

OPERATIONS:

Considering the nature of business, cost pressures are always at the forefront; we are continuously investing in the development of competent vendor base as well as in-house component production facilities to brin g flexibility and cost competitiveness in the overall scheme of things.

Investment into advanced low cost manufacturing is ongoing; along with adding capacities wherein man agement sees good future demand and potential growth.

STRENGTHS:

Our strengths include:

• Wide customer and geographical customer base to minimize exposure to any one customer segment.

• Competent research, design and product homologation capabilities

• Constant drive to increase customer base and introduction of new products.

• Capability to adjust the operations activities to meet volatility in demand

WEAKNESSES:

Some of the concerns:

• Unprecedented increases in commodity prices, inflationary pressures and constant global supply chain disruptions

• Foreign Exchange volatility.

OPPORTUNITIES:

New development projects:

Growing Indian economy provides several growth opportunities. Growth in automotive industry is characterized by introduction of numerous new platforms across various applications. At the same time there is ever increasing demand for higher efficiency and tighter emission control. This provides opportunity for your Compan y to collaborate with our customers and co-create efficient engine cooling solutions that is energy efficient and cost efficient.

New Market Sectors:

Cooling systems have a very wide usage in automotive and industrial segments globally. Various initiatives of past have resulted in business at present and we are multiplying efforts in that direction.

Global OEM Customers:

Banco is already a supplier to many large industrial multinational corporations in India as their strategic supplier and we are leveraging these relationships to their overseas locations in stages. We are observing a higher intake of RFQs from foreign OEMs and business development is progressing well.

Strengthening Export Business:

Customers globally are looking for cost effective alternate to their existing suppliers. Banco Products continues to expand its initiatives in the overseas market to realize some of these opportunities.

THREATS, Risk and Concerns:

Dynamic business environment of modern times throws several challenges from time to time. Threats include:

• Growing competition both from domestic and global players.

• High inflationary trends.

• High dependence on imported raw material.

• Volatility in metal prices and fluctuations in Foreign Exchange.

• Foreign government putting protective duty barriers to Indian exports.

TECHNOLOGY:

Management strategically invests to upgrade its product technology and manufacturing processes in order to meet customer expectations ahead of time.

We have developed advanced solutions for contemporary emission norms for BS-VI for automotive, BS-IV / Trem V for agriculture machineries/off highway equipment and new CPCB 4 norms for Power Generation equipment. We are also investing in developing competencies and capabilities of our people so that they can con tribute effectively to the success of the organization while realizing their own full potential.

Internal Control and its Adequacy:

The system of internal control designed to provide reasonable maintenance of proper accounting records and the reliability of operational and financial information complying with statutes, safeguarding assets from unauthorized use or losses executing transaction with proper authorization ensuring compliance of corporate policies used with a view to running business. The Company has clearly defined organization structure and lines of authority. Sufficient control is exercised through monthly, quarterly and annual business review by the Management Review Committee and application of Corporate Governance. An internal audit system is in place. Normal foreseeable risks to the Companys assets are adequately covered by comprehensive insurance.

The Company has, appointed Mr. Snehal Kumar Shah, Head-Internal Audit Department as Internal Auditor of the Company, for the services of Internal Audit of operations of the Company for better control and to ensure adequacy and efficacy of the Internal Audit function.

In line with well accepted practices and objectives, the planning and internal audits are oriented towards the review of operational controls in the management of risk strengths and opportunities.

The Company has an Audit Committee, which reviews the Reports of Internal and External Auditors, making suggestions for improvements, follow up on the implementation of corrective actions and keeps informed the Board of its major observations from time to time.

Segment-Wise Performance a) The Company is only in one line of business- automobile components. b) The Segment Revenue in the Geographical Segment considered for disclosures are as follow:

- Revenue within India includes sales to customers located within India

- Revenue outside India includes sales to customers located outside India

( Crores)

Sales	2023-24	2022-23
Within India	727.00	709.00
Outside India	265.00	270.00

Information Technology:

The Company is successfully operating SAP (ERP) system with the use of advanced licensed software pa ckages for product simulation, development and general engineering work.

Financial performance with respect to operational performance:

The detailed financial analysis of the Companys operations for the year is given in the Boards Report and therefore the same is not repeated. However, some important ratios on the Companys profitability are given below.

Particulars	2023-24	2022-23	Reasons for Significant changes
Operating Profit (PBT)(%)	30	29
Earnings Per Share (EPS) ()	36	34
Cash Earnings Per Share ())	39	37
Return on Net worth (PAT) (%)	35	35
Dividend Payout Ratio	95	82
Retained Earnings () in crores	595	583
Retained Earnings (%)	71	74
Debtors Turnover	4.60	4.60
Inventory Turnover	3.90	4.40
Interest Coverage Ratio	308	2198
Current Ratio	5.2	5.1
Debt Equity Ratio	0.00625	0.00032

Material Developments in Human Resources:

The industrial relations in all the units of the Company during the financial year 2023-24 were peaceful and harmonious.

Experienced and motivated employees have been the backbone of the Company. There were 418 peoples employed in the Company as on 31.03.2024.

Your Company puts special emphasis on team building and positive work culture. We train employees to understand and absorb the latest technological trends which in turn, prepare them to achieve higher efficiency levels in production, quality besides leading to higher customer satisfaction.

There is a systematic identification of training needs. Training and development inputs are provided to all employees in the areas of skill development and behavioral improvement so that individual development keeps pace with organizational development.

Future Strategy / Outlook:

Your Company will continue to follow technology led strategy to realize profitable growth and thus c reate sustainable value for the organization. Collaboration with our customers on the basis of our proven ‘bespoke engineering approach will remain cornerstone of our future strategy. Besides strengthening our core markets, we will expand and broad base our customer market portfolio in Indian and International markets. We will continue to invest in advanced manufacturing and supply chain processes to retain our leadership position. Relentless drive to improve quality and productivity while cutting waste and cost defines our approach towards manufacturing excellence.

Qualified, trained and motivated employees drive successful strategies and towards this objective we also plan to step up our employee development initiative in the coming days.

Cautionary Statement:

Certain statement made in this report, are forward looking statements and actual results may differ from such expectations or projections about the future, as several factors would make significant difference to the Companys operations such as economic conditions affecting demand and supply, governments regulations, level of competitions prevailing at the relevant time, etc. The Company assumes no responsibility publicly to amend, modify or revise any such statements on the basis of subsequent developments, information or events.

	By the order of the Board,
	Mehul K. Patel
Date : 09.08.2024	Chairman
Place : Bil	(DIN: 01772099)