Birla Tyres Management Discussions


Performance Overview

The Companys performance during the year is shown below:

Rs / Lakh

S.No. Particulars March 31,2022 March 31,2021
1 EBIDTA (1,439.83) (9,197.76)
2 Finance Cost including interest 17,614.97 16,235.85
3 Cash Profit /(Loss) (19,054.80) (25,433.61)
4 Depreciation 2,960.54 3,329.07
5 Profit / (Loss) Before Tax (22,015.34) (28,762.68)
6 Provision for Tax Expense - -
7 Profit / (Loss) for the year (before exceptional item) (22,015.34) (28,762.68)
8 Exceptional Item (43,551.70) -
9 Total Profit / (Loss) for the year (65,567.04) (28,762.68)

Industry Overview

The contribution of the automobile sector to the overall GDP of India now stands at 7.1 per cent and 49 per cent of the manufacturing GDP, with an annual turnover of RS 7.5 lakh crore and export of RS 3.5 lakh crore.

The Indian Tyre Industry was achieving continuous growth during the year despite challenges in raw materials procurement and auto industry slowdown. The tyre industry is bringing agility and flexibility into its operations by focusing on the changes affecting each and every segment in the automotive space, including the increase in number of vehicles like quadri cycles, e-rickshaws and electric buses.

Tyre demand has been relatively more resilient compared with other auto components as the replacement demand in the tyre industry insulates it from cyclicality to a large extent, while vehicle production fell by 13-15% in the last two Year on account of weak consumer sentiments and subdued economic activities, domestic tyre demand contracted only by 8%. Exports, which constitute nearly one-fifth of the tyre industrys revenues, grew by about 10% in value and about 8% in volume terms after a marginal contraction in previous year. The same has been helped by the fact that Tyre imports continue to remain low on the back of government regulations, thus favouring the domestic players.

The Indian tyre industry is expected to recover from five Year of weakness and be on a linear growth path (12% CAGR over FY21-25E), subject to being supported by timely capacity expansion across companies. Improving demand, stable competitive intensity. Governments efforts to stimulate agricultural sector had some boost in Tractor sales & good monsoon also gave positive effect in the sector. However, the increase in Raw material procurement price remains a concern. The Industry may not be able to pass on the full costs to the Consumer.

In early 2021-22, the country saw the start of the second Covid wave. All states had imposed lockdowns impacting business activity again. However, in the second wave, the number of cases and the severity of the disease were much more than was experienced in the first wave. This have impacted the first quarter GDP though the impact will be much lower than the last year The current wave is being tackled with localized lockdowns and not with complete lockdown as was the case last year.

Risks and Concerns

Profit margins on tyres took a hit as Raw Materials prices increases significantly and under the current economic situation it may not be possible to pass on the entire raw material price increase to customers. This will be impacting the CAPEX for the expansion facilities going forward.

However, the impact of current destabilization in the world due to Russia Ukrain crisis is yet to be ascertained. Economic slowdown can lead to decreased volume and capacity utilization.

Growth Drivers and Outlook

The Road conditions are improving virtually by the day. Indeed there has been a credible move towards concretizing road surfaces both in urban agglomerations as well as state and national highways. The progressive upgradation in road conditions and their geographical spread across the country has been a fillip to road transport. As the Indian economy expands in size, so will the road transport and therefore the demand for tyres.

To boost the same GOI has made a 68 % increase in budget allocation for enhancement of road public transport. And this market need will not be for commercial vehicles alone. There will be a demand boost for tyres of all types of automotive vehicles including off the road ones.

The new scrappage policy which will be effective from April 01, 2022 could play an essential role in reviving the commercial vehicle sector in India. As per the market reports, it is expected that the situation would improve gradually during the current fiscal that has been affected by the current downturn in the industry and the corona virus pandemic.

The Companys Tyre Business going forward

The Company did not make much progress in the financial Year 2021 - 22 as the operations at the factory were halted on account of unavailability of required working capital.

The Company has filed Scheme of Arrangement for Reconstruction and for Compromise with its Creditors and Members together with Demerger of Passenger Car Radial Business into Birla Tyre Radials Limited ("Scheme") with the stock exchanges. The same is pending approvals.

The Company is taking all necessary steps to resolve the ongoing issues and restart its operations with support of all stakeholders.

In overall terms, the Tyre business looks to the future with confidence.

Financial Performance during 2021-22:

The "General Review on Business Performance" incorporated in the Directors Report sets out a brief performance resume of the Companys operating businesses.

A. The Interest Coverage Ratio stood negative 0.25 as at March 31, 2022.

B. The Operating Profit Margin percentage stood at negative 2.54 as at March 31,2022.

C. The Net Profit Margin percentage is also negative at 121.05 as at March 31, 2022.

The Net Worth as at March 31,2022 is negative RS 1,22,136.87 lakh.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations thereof, including:

Sl. No. Particulars 2021-22

2020-21

Explanation
i) Debtors Turnover Ratio 0.05 1.24 There has been decrease in the operations of the Company during the current year. Further current year sales were mainly done on receipt of the advance.
ii) Inventory Turnover Ratio 0.31 1.53 There has been no production and purchase during the current year due to unavailability of working capital.
iii) Interest Coverage Ratio (0.25) (0.75) There has been decrease in the operations of the Company during the current year leading to decrease in profits.
iv) Current Ratio 0.07 0.09 -
v) Debt Equity Ratio (0.93) (1.73) Increase in loss for the year due to the impairment of CWIP and corresponding increase in the total borrowing on account of accrual of the interest.
vi) Operating Profit Margin (%) (2.54) (0.67) Revenue from operations has drastically reduced in the current year in comparison to the previous year.
vii) Net Profit Margin (%) (121.05) (2.09) Revenue from operations has drastically reduced in the current year in comparison to the previous year. Also Losses have increased in the current year on account of Impairment of CWIP.
viii) Return on Equity (0.73) (0.68)

Internal Control Systems and their adequacy:

This has been covered in the Directors Report.

Material Developments in Human Resources

Human Resources continue to be the cornerstone around which the Company functions. The Company engages with the people who work for it on a proactive basis so as to transform the environment from a "place of work" to a "place to work". The Company believes that such approach has assisted it enormously in promoting harmony and a sense of belonging amongst those working for it thereby seeking to enhance their work life balance. The gradual evolution of this perception constitutes, according to the Company, a defining sign of sustained employee commitment to its wellbeing.

The Company has declared "No Work No Pay" for illegal strike at its factory at Balasore. For No Work No Pay period, no compensation is considered.

The number of people employed as on March 31, 2022 is separately covered under Annexure IV to the Directors Report.

For and on behalf of the Board of Directors
Rashmi Bihani Manjushree Khaitan
Director Chairman
Place: Kolkata DIN: 07062288 DIN: 00055898
Date: April 11,2022