Containe Technologies Ltd Management Discussions

• Overview:

Containe Technologies Limited (BSE: 543606) (Company) is a public company listed on BSE SME, incorporated on 16th September 2008 as a private company. The registered office of the Company is situated at H. No. 3-13-142/ 341P, 342, Gokul Nagar Marriguda, Mallapur, Secunderabad, Hyderabad-500076, Telangana, India.

The Company is an ISO 9001:2015 Certified company which indicates that its products and services meet expectations of Stakeholders. Your Company is primarily engaged in the business of Manufacturing of Speed Limiting Devices, Vehicle Location Tracking Devices, Embedded SIM Cards & M2M Services.

The Speed Limiting Device is a Safety Product which is mandatory fitment for New Registration, fitness of all commercial vehicles of goods carriers, hazardous petroleum/chemical tankers, public transport, and school buses, as per GSR 290E of 15.04.2015. It is designed, developed, and manufactured according to the Automotive Industry Standard (AIS 018) "MOTOREYE & LIMITS" approved by ARAI and AIS 037 Standard, ensuring conformity of production audits for its excellent quality and proven durability.

Vehicle Location Tracking Devices Product has been tested as per Automotive Industry Standard AIS-140 & BIS 16833 Standard. This product is approved by ICAT TAC Certificate No: CK8073. This IRNSS VLTD (Vehicle Location Tracking Device) is designed with Quad band GSM / GPRS Module, equipped with GPS/IRNSS receiver to provide accurate navigation data, this can be remotely configured (OTA Configuration).

The Company has registered APN for PAN India "ctplm2m.in" and manufactures its owned Dual Profile e-SIMS in collaboration GSMAApproved Manufacturing facility and has MOU with service providers Like BSNL, Vodafone Idea and Airtel for e-SIM Profiles and has M2M service providers License from Department of Telecommunications.

• Global Economy:

The global economic landscape in 2023 was shaped by a series of significant events, including the ongoing recovery from the pandemic, geopolitical tensions, and shifts in monetary policies across major economies. Global geopolitical tensions and trade disputes have caused price fluctuations in commodities like oil, impacting international trade and investment flows. Despite these challenges, the global economy grew by 3.1% in 2023, supported by increased spending and improved supply chains after pandemic disruptions.

The IMF estimated a growth rate of 4.7% for Asia in 2023, with China and India laying a major role. In China, higher spending on disaster recovery and resilience initiatives supported growth, while in India, robust domestic demand led to an upward revision in the growth estimate.

The automotive industry is an important pillar of the world economy. It affects every aspect of daily living, and it is an important source of employment - approximately 5% of the global labor force is directly or indirectly employed in this industry.

As we move into 2024, the outlook appears cautiously optimistic, supported by moderating inflation and steady growth.

https://www.oecd.org/en/about/news/press-releases/2024/05/economic-outlook-steady-global-growth-expected-for-2024-and-2025.html

https://www.imf.org/en/News/Articles/2024/01/30/013124-apdreo-presser-openingremarks#:~:text=Core%20inflation%20is%20also%20on,most%20of%20the%20upward%20revision.

• Global Auto Components Industry:

Global economic development is dependent on the activities of the automotive industry due to the wide range of businesses that it is integrated with. The automotive industry contributes around 3% of the worlds total GDP output, and that share is higher in emerging markets such as India and China.

Semiconductor market will leap from $574 billion in 2022 to $1,380 billion by 2029, with a 12.2% CAGR. This surge is driven by the booming consumption of consumer electronics worldwide. The Automotive industry in India is the third-largest by production in the world as per 2023 statistics, India is the 3rd largest automobile market in the world in terms of sales. In 2022, India became the fourth largest country in the world by the valuation of its automotive industry.

• Indian Economy:

In the face of global uncertainties and domestic challenges, the Indian economy has displayed impressive strength and sustained growth. With an estimated growth rate of 7.6% for FY-24, significantly higher than global forecasts, India continues to be the fastest-growing major economy. The economy has managed to attract multinational corporations seeking quality services at reduced costs by leveraging its young talent pool for cost-effective outsourcing and offshoring services. Despite the challenges, proactive monetary policies by the Reserve Bank of India have played a crucial role in gradually easing inflation, setting the stage for continued economic growth in the coming years.

Robust Growth: Indias economy has continued its strong performance with an estimated growth rate of 7.6% in FY24, driven by robust domestic demand, supported by a rebound in consumer spending and a recovery in the services sector.

Policy Reforms: The Indian governments focus on economic reforms, including initiatives to improve ease of doing business, attract foreign investment, and promote digitalization, has contributed to the positive growth outlook.

https://www.imf.org/external/datamapper/profile/IND

• Indian Auto Components Industry:

The Indian automotive industry is undergoing transformation driven by a confluence of factors. Evolving industry standards, changing consumer preferences, and a growing emphasis on sustainability are pushing advancements in all areas of the industry.

Indias auto component industry is an important sector driving macroeconomic growth and employment. The industry comprises players of all sizes, from large corporations to micro entities, spread across clusters throughout the country. The auto components industry accounted for a significant part of Indias GDP and provided direct employment to 1.5 million people. By 2026, the automobile component sector will contribute 5-7% of Indias GDP. The total Automotive electronics demand in India is projected to grow from US$ 10.6 billion in 2022 to US$ 70.3 - US$ 74.4 billion by 2032.

During the Financial Year (2023-24), the industry clocked a turnover of Rs. 6.14 lakh crore (US $74.1 billion), representing a growth of 9.8% on a year-on-year basis. The industry also posted a trade surplus of $300 million during the year, as exports grew 5.5% to Rs $21.2 billion while imports rose by 3% to $20.9 billion.

Over the next decade, embedded and connected location services will remain a core component of in-vehicle infotainment systems for carmakers. The Indian automotive industrys digital transformation presents exciting opportunities; the demand for location-based services is set to surge. By capitalizing on Indias strong R&D capabilities and embracing innovation, navigation companies can play a vital role in shaping the future of mobility in the country. India occupies a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy trucks manufacturer in the world.

https://prodesk.in/autocomponents#:~:text=The%20auto%20components%20industry%20accounted,%2D7%25%20of%20Indias%20GDP.

https://www.acma.in/uploads/publication/research-studies/4_ACMA_Grant_Thornton_Bharat_Auto_Electronics_Manufacturing_Report.pdf

https://www.autocarpro.in/news/apollo-tyres-aims-to-be-net-zero-by-2050--121684

https://www.ibef.org/industry/automobiles-presentation

• Government Initiatives for Automobile Industry:

1. There have been plenty of investments in the automobile sector recently, the Automobile Sector attracted Foreign Direct Investment equity inflow (FDI) worth US$ 36.268 billion between April 2000 - March 2024.

2. Ministry of Road Transport and Highways has revealed plans to roll out Bharat NCAP, Indias own vehicle safety assessment program. In 2021, the Government launched the Vehicle Scrappage Policy, which aims to phase out old polluting vehicles in an environmentally safe manner.

3. The Governments goal is to position India as a global hub for manufacturing, research and development (R&D). To support this, since 2015 it has set up five National Automotive Testing and R&D Infrastructure Project (NATRiP) centres as well as the National Automotive Board to act as facilitator between the Government and the industry.

4. The Indian government has planned US$ 3.5 billion in incentives over a five-year period until 2026 under a revamped scheme to encourage production and export of clean technology vehicles. Initiatives like Make in India, the Automotive Mission Plan 2026, and NEMMP 2020 will be a net positive for the sector.

5. In November 2020, the Union Cabinet approved a PLI scheme in automobile and auto components with an approved financial outlay over a five-year period of Rs. 57,042 crore (US$ 8.1 billion). In September 2021, the Indian government issued notification regarding a PLI scheme for automobile and auto components worth Rs. 25,938 crore (US$ 3.49 billion). This scheme is expected to create an incremental output of Rs. 2,31,500 crore (US$ 31.08 billion).

6. 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.

https://www.ibef.org/industry/automobiles-presentation

• State-Wise Performance:

• Opportunities:

1. Expanding the business in different states thereby leading to creation of new customer base;

2. Growing demand for vehicle telematics and ITS Products;

3. Approval from the State Government of Karnataka, Maharashtra, West Bengal, Madhya Pradesh and NCT of Delhi to register Vehicle Location Tracker (VLT) Device for usage in the respective jurisdiction.

4. Approval from State Government of Nagaland and APSAC to supply and fitment of Vehicle Location Tracker (VLT) Device;

• Threats:

1. Initial delays in implementation by State Governments, leading to demand and supply imbalance and price competition;

2. Overhead expenses for providing performance Bank Guarantees may impact the Working Capital;

3. Initial overhead costs for software development and manpower resource maintenance;

4. Ongoing expenses for product R&D, improvements/updates, and testing agencies.

• Outlook:

The rapidly globalizing world is creating newer opportunities for the transportation industry, especially while shifting towards electric, electronic and hybrid cars, which are deemed more efficient, safe and reliable modes of transportation.

Over the next decade, this will lead to newer verticals and opportunities for auto component manufacturers. To help them adjust to the shifting dynamics of the sector, the Indian government has already offered various production incentives.

Advancement in AIS140 Standard (Amendment -3 Draft Released) will be a new On Board Unit (OBU) Technology Development of GNSS Tolling for Electronic Toll Collection. It has been the next trend in Vehicle Telematics, where all the Commercial and private NHAI road users have to fit this device for free traffic flow in National Highways and pay by use of kilometers through NPCI, Fastag KYC and class of Vehicle. Company has the experience and capability to enter in this business and have a good market share.

Our existing product, AIS 140/BIS 16833 IRNSS VLTD (Vehicle Location Tracking Device), is part of the ITS standards set by the Ministry of Road Transport and Highways (MORTH). It is mandatory for all newly registered commercial vehicles, and existing vehicles on the road (in Use Vehicles) will require to pass their annual fitness checks. The market potential for VLTDs is approximately 25 million devices over the next five years.

• Risks And Concerns:

Risks are inevitable in every business and Company strongly believes that its success depends upon identification of potential risks in advance and the creation of appropriate mitigation strategies to bypass or minimize impact, to the extent possible.

With unprecedented changes in business environment, other Companies are operating in an environment of volatility and uncertainty, but our strong Governance and business structure, with stakeholder interest at the core, makes us cognizant of these risks and uncertainties that our business faces. The Company on a periodic basis identifies these uncertainties and after assessing them, formulates short-term and long-term action plans to mitigate any risk which could materially impact the Companys long-term goals and Vision.

• Internal Control Systems and Safeguards:

All internal controls are well aligned with the evolving business needs, objectives, and overall strategic direction. The Company ensures integrity in conducting its business, safeguarding of its assets, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records.

• Human Resource Developments / Industrial Relations:

Human resources are the principal drivers of change and have always been one of the most valued stakeholders of the Company. The Company aims to develop the potential of every individual associated with the Company as a part of its business goal.

During the period under review, the total number of people employed by the Company are9 (Nine).

• Key Financial Ratios:

Particulars	Current Year	Previous Year
Debtors / Turnover	2.08	2.21
Inventory/ Turnover	1.3	0.93
Interest Coverage Ratio	0.43	0.42
Debt / Equity Ratio	0.49	0.44
Operating Profit Margin (PBT)	0.14	0.1
Net Profit Margin (PAT)	0.11	0.07
Return on Net Worth	0.15	0.07

Cautionary Statement: The statement and views expressed by the management in the above said report are on the basis of best judgment but the actual results might differ from whatever stated in the report. The Company takes no responsibility for any consequence of decisions made based on such statements and holds no obligation to update these in future. Readers are cautioned not to place undue reliance on these forward-looking statements.