8Indias EV Economy: The Future of Automotive Transportation runner as global
supply chains are being recalibrated to de-risk the reliance on China. This is especially
true in the electronics industry where global OEMs see India as a capable and competitive
alternate to China.
To capitalize on these macro trends, your company has put in place a focused strategy
to identify and convert opportunities.
a) to augment the revenue contribution from the Indian market.
b) to add new customers and gain share from existing customers that are pursuing a
China +1 strategy.
c) to prioritize medium to higher volume products to enable faster scaling of the
business.
Your companys efforts to address these opportunities have begun to yield results in
the past year with the ramp up of new customers in the E-mobility, clean tech and
electrification segments resulting in revenue growth compared to the previous year.
Choosing to focus specifically on these high growth industry sectors has also yielded
great results in terms of significant increase in order book over the past year, paving
the way for revenue growth and margin improvement going forward.
Centum has also established itself as a strategic partner to global Defence &
Aerospace OEMS and is now well integrated into the global supply chain of these companies.
Demand growth from these legacy defence customers as result of increased defence budgets
in Europe and the conflict in Ukraine also contributed to order book growth.
A key challenge for execution over the past year has been the supply chain disruption,
as a result of severe semiconductor shortage. The effects of this crisis have been
especially protracted in the long-life cycle product segments we operate in, as the
designs call for components manufactured on older technology nodes. Your company has taken
and continues to take various measure to mitigate these supply chain risks and this
remains the highest operational priority for the coming year. There does seem to be an
easing in the severity of the issue and the expectation is for lead times to reduce to
more manageable levels towards the end of the year.
Furthermore, a significant amount of time and effort is being spent on digitalization,
automation of processes and implementation of industry 4.0 best practices to improve
productivity and margins, product quality and ultimately customer satisfaction.
Strengthening of teams at all levels is also being done in preparation for the expected
growth in the business.
b. Engineering R&D Services:
Your Companys ER&D Business Unit provides advanced design and engineering services
to help customers conceptualize and realize the next generation of products or re-engineer
and add value for existing products. Our team of about 650 design engineers spread across
the world, work hand in hand with our customers, which are large global OEMS. Your company
has established a strong and differentiated reputation as a technology leader and
specialist in safety critical electronics and embedded systems design for high reliability
applications. With domain experts with 30+ years of design experience and teams of highly
skilled engineers in critical disciplines of High-speed digital design, FPGA, Power
Electronics, Embedded and Application Software, Cybersecurity among others, your company
is involved in many leading-edge R&D programs. Engagement models range from consulting
services to fixed-price projects and turnkey Build-To-Spec contracts.
This business unit also develops Public Address & Passenger Information Systems
(PAPIS) for the rail transportation market with the goal of providing real-time
information access and security to commuters. Centum has established a proven track-record
of successfully deployed systems in the European, North American, and Asian transport
markets.
Considering the strong and differentiated capabilities that exist in this business
unit, it has not performed to expectation and therefore, certain key leadership and
strategic changes were undertaken to ensure improved performance and better positioning to
capitalize on the growth opportunities.
• A more critical risk assessment process has been put in place while bidding on
new fixed price projects to ensure we cut down cost overruns which has been a major
contributor for margin erosion in these past years.
• A more focused approach and process to improve the onshore-offshore mix has also
been undertaken and has progressed well over the past year. The India design center has
significantly ramped up. A dedicated test system development facility was inaugurated to
support the transfer of this activity from France to India. For the PAPIS business, the
transfer of the manufacturing and supply chain management from Canada to India was
completed in the past year and a ramp up of the engineering capability for this activity
in India was also done. Centum will be the first company to fully design and manufacture
this critical system from India for the domestic and global market.
• Enhancing the value proposition to customers through a focused capability and
capacity enhancement in critical areas of cybersecurity, IoT and connectivity solutions as
well as improved competitiveness through global delivery centers has resulted in new
business wins. Major new programs with the top aerospace and rail transport OEMs were won
in the past year which also contributed to the order book growth.
The steps taken have set this business on the right track and should result in
sustainable revenue growth and margin improvement in the subsequent years.
c. Strategic Electronics:
Strategic Electronics Business Unit is focused on the development of products in the
high reliability and high technology areas of Indian Defence, Space and Aerospace sectors.
This division works on Indigenization of electronic systems and subsystems for customers
in the strategic sector to enable self-reliance and the mode of engagement is "build
to specification" starting from design to qualification and manufacturing. Ensuring
products are designed for harsh environments and supporting them over a long lifecycle are
important activities of this group. IP creation, many of which are a first in India, is a
core value that this division brings both to Customers and to Centum.
With the increased focus on Make in India and Atmanirbhar Bharat policies of the
Government, this division has tremendous opportunities in the domestic defence sectors.
These policies provide access to many programs, which were otherwise generally imported or
open only to DPSUs. The opening up of the space economy to private players in India has
also presented an excellent opportunity for your company which is a recognized leader in
the country with a credible history of delivering space systems.
A clear strategy has been put in place to capitalize on this opportunity. Investment in
R&D has been ramped up to undertake larger new projects and enhance the product range
in the segment. The recent indigenization efforts in addressing electronics in land
systems such as Radars and Tanks are resulting in the initial production opportunities
reaffirming the technical and commercial capability of the company. In the past year, your
company delivered payloads for a major defence space program which again was a first for
the country. This remains a major focus area for the government and larger opportunities
in the same domain are in the bid stages.
Another key initiative being worked on is to move up the value chain from subsystems to
systems and address opportunities directly with the Armed forces. Investment in sales
& marketing and increased engagement with end users in defense sectors has brought
significantly larger opportunities at the platform level which are expected to fructify in
the coming 2-3 years. Where necessary, specific partnerships have been established with
global OEMs in the form of MoUs and teaming agreements, as well as with very innovative
startups to co-develop products and bridge internal technology gaps to address larger
opportunities.
Your company continues to work towards mitigating the risks associated with the
increased lead times of the semiconductor and electronics components and work innovatively
to address the Indian defense, space, and aerospace requirements. The team is also working
to leverage its vast design and other technical capabilities developed over the years to
address some of the export requirements by leveraging the strong customer relationships
that exist with other business units.
5. Risk Factors
In the Built to Spec (BTS) business, some customers in D&A segment, claim ownership
of the design without paying for the same. Also, the additional risk is that the customer
may use our design and attempt to procure subsequent supplies through public tender as
Built to Print products. Thus Centum will not be able to capture the value over the life
cycle of the project.
In the D&A segment, sometimes the projects that are awarded as Build To Print
(BTP), may involve additional work since the designs may not be complete in all respects
and Centum needs to spend additional efforts to complete the design. Due to this reason,
the costs may increase and result in time delays.
Under the Govt of India procurement policy, generally the L1 bidder (least cost) is
awarded the business. Although there are processes and procedures for Technical Evaluation
to qualify the bidder, sometimes bidders who dont have the required capabilities are
allowed to bid. Such bidders may bid low without knowing the difficulties and complexities
of the project. This may impact the opportunities for your Company.
Since the products and services offered by the Company are hi-tech and complex, there
may be inordinate delays in approvals and certification which can impact the timely
deliveries and result in levy of Liquidated damages.
In the Engineering R&D services business, we undertake fixed price projects and
sometimes due to change of specifications midway by the customer or underestimation of
work involved, we could have project overruns that create profitability issues.
In the Transport business, there are long-term fixed-rate contract projects that may
run for several years, the material cost may increase resulting in adverse impact on
profitability.
BTP business was severely affected in the past couple of years due to shortage of
electronic components. Though the situation improved in the later part of FY 23, the
shortage of electronic components still poses some risk in this business.
Generally, in the BTP business the customer provides forecasts of demand (to facilitate
material planning) and converts them to orders over a period. Materials are procured based
on the forecast. If the forecast is not converted to customer purchase orders, we can get
into excess and obsolete material issues. Although we have agreements and checks &
balances with the customers on these issues, sometimes there is a possibility of these
issues becoming contentious.
While we have a strong IT & Cyber security infrastructure and protocols and your
company is also certified ISO 27001 (Information Security Management Systems), as the
increasing cyber security threats may lead to data loss and operational disruptions.
The increased demand for skilled manpower poses the risk of talent retention to your
Company. Several programs to attract, retain and develop talent are pursued on a
continuous basis.
It may be noted that the Company has constituted a Risk Management Committee (as a
subcommittee of the Board) to enhance the Risk Management capabilities with high focus and
mitigate the risks mentioned above.
6. Human Resources
Your Company is committed and focused in building a strong organization by hiring,
managing, developing, and retaining the most talented and experienced employees. Your
company has some of the best talent coming from various domains. Special attention is
given to training and upgrading of peoples skills, providing excellent working
conditions, benchmark with other large companies while rewarding the employees. Lot of
emphasis is placed on ensuring a rewarding experience to the employees in your Company. As
on March 31, 2023, the employee strength of the Company was 1724.
You company continues to strengthen its partnership with reputed academic institutes
such as IISc (India Institute of Science) and Reva university in multiple ways. To develop
talent, a joint program with REVA university was undertaken in the past year to create a
curriculum around advanced digital design and train young engineers to better prepare them
to work on critical projects. The first batch of graduates from this program has yielded
excellent results.
Your company has institutionalized the Kaizen, 5S and Lean Six Sigma initiatives, which
have continuously helped in improving operational excellence.
7. Internal control systems and their adequacy
Your Company has placed strong emphasis and effort on the internal control systems. The
internal checks and balances are augmented by a formal system of Internal Audit by KPMG.
The company also has an in-house internal auditor to check the controls and strengthen the
systems and processes. Additionally, the Internal Financial Controls are checked by the
management and validated by the Statutory auditors.
Financial condition
A. Consolidated
i. Share capital
The share capital of the Company stands at H 129 million.
ii. Borrowings
The Loans have been reduced by H 98 million from H 2,726 million as on March 31, 2022
to H 2,628 million as on
March 31, 2023.
iii. Fixed Assets
The Capital expenditure in relation to Property, Plant & Equipment for 2022-23 is H
122 million.
iv. Working Capital
Inventories has increased by H 363 million from H 2,248 million as on March 31, 2022 to
H 2,611 million as on March 31, 2023.
Receivables have increased by H 1,329 million from H 2,499 million as on March 31, 2022
to H 3,828 million as on March 31, 2023.
Current liabilities have increased by H 1,649 million from H 5,792 million as on March
31, 2022 to H 7,441 million as on March 31, 2023.
v. Cash flows
| Particulars |
J in Million |
| Operating activities |
709 |
| Financing activities |
(740) |
| Investing activities |
(112) |
vi. Results of Operations
The business operations for 2022-23 resulted in the Company achieving total income of H
9,288 million as against H 7,880 million for 2021-22.
The Profit/(Loss) before tax before Exceptional items for the year 2022-23 is H 121
million as against H 82 million for the year 2021-22.
vii. Key financial parameters
| Particulars |
FY 23 |
FY 22 |
| Debt /Equity 1 |
1.25 |
1.34 |
| Debtors Turnover Ratio(Days) 2 |
136 |
137 |
| Inventory Turnover Ratio(Days)3 |
214 |
253 |
| Current Ratio 4 |
1.00 |
1.01 |
| Interest Coverage Ratio without exceptional items5 |
1.40 |
1.48 |
| Operating Profit Margin 6 |
4% |
5% |
| PAT Margin7* |
1% |
-7% |
1 Non current borrowing + current borrowing / Equity attributable to equity
holders of the parent
2 Average receivables / revenue from operations x 365 days
3 Average inventory/ (Cost of materials consumed + Decrease / (increase) in
inventories of work-in-progress and finished goods) *365
4 Current assets / current liabilities
5 EBIT** / Finance cost
6 EBIT** / total income
7 PAT / total income Reason for variation (>25%):
* FY22 decreased on account of exceptional items.
** Excludes exceptional item & share of profit / loss from associate /
discontinuing operations and including other income and finance income
B. Standalone
i. Share capital
The share capital of the Company stands at H 129 million.
ii. Borrowings
The Loans have increased by H 80 million from H 979 million as on March 31, 2022 to H
1,059 million as on March 31, 2023.
iii. Fixed Assets
The Capital expenditure in relation to Property, Plant & Equipment for 2022-23 is H
100 million.
iv. Working Capital
Inventories has increased by H 329 million from H 1,987 million as on March 31, 2022 to
H 2,316 million as on March 31, 2023.
Receivables has increased by H 1,197 million from H 898 million as on March 31, 2022 to
H 2,095 million as on March 31, 2023.
Current liabilities has increased by H 1,316 million from H 2,653 million as on
March 31, 2022 to H 3,969 million as on March 31, 2023.
v. Cash flows
| Particulars |
J in Million |
| Operating activities |
214 |
| Financing activities |
(93) |
| Investing activities |
(133) |
vi. Results of Operations
The business operations for 2022-23 resulted in the Company achieving total income of H
5,052 million as against
H 3,538 million for 2021-22.
The Profit /(Loss) before exceptional item and before tax for the year 2022-23 is H 264
million as against H 172 million for the year 2021-22.
vii. Key financial parameters
| Particulars |
FY 23 |
FY 22 |
| Debt /Equity 1 |
0.37 |
0.37 |
| Debtors Turnover Ratio(Days) 2 |
109 |
99 |
| Inventory Turnover Ratio(Days)3* |
249 |
335 |
| Current Ratio 4 |
1.22 |
1.26 |
| Interest Coverage Ratio without exceptional items5 |
2.68 |
2.18 |
| Operating Profit Margin 6 |
8% |
9% |
| PAT Margin7 |
4% |
3% |
1 Total Debt / Total Equity.
2 Average receivables / revenue from operations x 365 days
3 Average inventory / cost of goods sold x 365 days
4 Current assets / current liabilities
5 EBIT / Finance cost
6 EBIT / total income
7 PAT / total income
Reason for variation (>25):
* Reduction on account of increase in cost of material consumed on account of increase
in operations/sales during the year.
By order of the Board For Centum Electronics Limited
| Place: Bengaluru |
Apparao V Mallavarapu |
Nikhil Mallavarapu |
| Date: May 27, 2023 |
Chairman & Managing Director |
Wholetime Director |
|
DIN: 00286308 |
DIN: 00288551 |
+91-9892691696
