Management Discussion and Analysis:
Pursuant to Schedule V to the Securities and Exchange Board of India
(SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management
Discussion and Analysis Report covering business performance and outlook (within limits
set by Companys competitive position) is given below:
A. INDUSTRY STRUCTURE AND DEVELOPMENT
Global Economy
According to IMF World economic Outlook (Apr-2024), Economic activity
was surprisingly resilient through the global disinflation of 2022-23. As global inflation
descended from its mid-2022 peak, economic activity grew steadily, defying warnings of
stagflation and global recession. Growth in employment and incomes held steady, reflecting
supportive demand developments including greater than expected government spending and
household consumption and a supply-side expansion amid, notably, an unanticipated boost to
labour force participation. The unexpected economic resilience, despite significant
central bank interest rate hikes aimed at restoring price stability, also reflects the
ability of households in major advanced economies to draw on substantial savings
accumulated during the pandemic.
The pace of expansion is low by historical standards, owing to both
near-term factors, such as still-high borrowing costs and withdrawal of fiscal support,
and longer-term effects from the COVID-19 pandemic and Russias invasion of Ukraine, weak
growth in productivity and increasing geo-economics fragmentation. Global headline
inflation is expected to fall from an annual average of 6.8 percent in 2023 to 5.9 percent
in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation
targets sooner than emerging market and developing economies. The latest forecast for
global growth five years from now at 3.1 percent is at its lowest in decades.
Risks to the global outlook are now broadly balanced. On the downside,
new price spikes stemming from geopolitical tensions, including those from the war in
Ukraine and the conflict in Gaza and Israel, could, along with persistent core inflation
where labour
markets are still tight, raise interest rate expectations and reduce
asset prices. A divergence in disinflation speeds among major economies could also cause
currency movements that put financial sectors under pressure.
Monetary policy remains focused on aligning inflation with the target
to pave the path for sustained growth in the medium-term.
Indian Economy
According to RBI, Domestic economic activity continues to expand at an
accelerated pace, supported by fixed investment and improving global environment. The
second advance estimates (SAE) placed real GDP growth at 76 per cent for 2023-24, the
third successive year of 7 per cent or higher growth.
From the supply side, industrial activity led by manufacturing
continued its momentum. The purchasing managers index (PMI) for manufacturing displayed a
sustained expansion in February-March, touching a 16-year high in March. Services sector
exhibited broad based buoyancy with all sectors registering strong growth. The PMI
services remained above 60 during February-March, suggesting sustained healthy expansion.
Automobile Industry in India
Automobile sales increased by 13.8 per cent (y-o-y) in March 2024, led
by two wheelers and passenger vehicle sales. While tractor exports recorded robust growth,
domestic sales showed some improvement.
The automotive industry is a highly competitive market which is
witnessing growth owing to factors such as increasing disposable income, the availability
of the financing options, rising urban population, close substitutes for each segment
which are equipped with best technological advancements such as active and passive safety
systems, comfort features, and high performing powertrains. The market also enjoys growth
due to the dynamic Indian public transportation network and the growing logistic
landscape.
According to Society of Indian Automobile Manufacturers (SIAM), The
industry produced a total of 2,84,34,742 vehicles including Passenger
Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers, and
Quadricycles in April 2023 to March 2024, as against 2,59,31,867 units in April 2022 to
March 2023.The overall passenger Vehicles domestic sales increased from 38,90,114 to
42,18,746 units in FY-2023-24, compared to the previous year. The automobile domestic
sales trend indicates that the two-wheeler segment has the highest sales volume of
1,79,74,365 units in the year 2023-24.
Automobile Industry Outlook
Key factors that are driving the automobile market include a growing
population, increasing investments in the road infrastructure, growing logistics industry,
and increasing popularity of SUVs. Indias annual production of automobiles in FY24 was
28.4 Million vehicles.
a. Commercial Vehicle (CV)/ Medium & Heavy Commercial Vehicles
(MHCV)
Domestic Commercial Vehicle industry had a marginal growth to 0.97
Million units and within that, some drop was experienced in LCVs and SCVs due to degrowth
in CNG segment. The growth in Commercial vehicles was also impacted due to migration to
higher tonnage trucks which created higher payload capacity. India enjoys a strong
position in the global heavy vehicles market as it is the largest tractor producer,
second-largest bus manufacturer, and third- largest heavy truck manufacturer in the world.
b. Two-Wheeler (2W)
The two-wheelers segment dominates the market in terms of increase in
volume by 13%, owing to a growing middle class and a huge percentage of Indias young
population.
c. Passenger Vehicle (PV)
The Indian passenger car market shown 8.4 % volume increase (3.9
Million to 4.2 Million) in FY24 in comparison with Last year.
Aluminium Market
Global Aluminium Casting Market reached US$ 70.5 Billion in 2023 and is
expected to reach US$ 125.7 Billion by 2031, growing with a CAGR of 75% during the
forecast period 2024-2031.The aluminium casting market in India is forecasted to grow by
USD 715 Billion during 2023-2028, accelerating at a CAGR of 8.5% during the forecast
period.
As the automotive industry pivots towards energy efficiency and
lightweight solutions, aluminium casting emerges as a pivotal player. Navigating
environmental
concerns and leveraging the potential for lightweight vehicle
applications, the aluminium casting market is poised to shape a sustainable future.
The automotive sector plays pivot role in the overall consumption of
aluminium in India. After a stellar performance in FY23, automotive demand is expected to
remain steady in FY 24 and in FY 25. In addition, the average quantity of aluminium used
per vehicle in India remains significantly lower ~40 -50 Kgs compared to global average of
~160-200 Kg.
Industrial & Engineering Market
Infrastructure investments are expected to increase to USD 778.90
Billion in FY 2020-25, which will provide a significant boost to demand for capital goods.
Under Budget 2023-24, capital investment outlay for infrastructure was increased by 33% to
10 Lakh Crores (USD 122 Billion) which would be 3.3% of the GDP
National Capital Goods Policy aims to increase industrial production of
the sector to USD 100 Billion. It played a pivotal role for manufacturing to contribute
significantly to MAKE IN INDIA. It also took steps to promote technology, skills,
exports and common facility centres in an effort to strengthen the overall industrial
infrastructure.
Storage Solutions Market
The Indian warehouse market is predicted to reach $34.99 Billion by
2027, with a CAGR of 15.64% from 2022.
The India industrial racking system market is valued at US$ 542.8
Million in 2022, and is projected to surge ahead at a CAGR of 10.3% to reach a market
valuation of US$ 1.4 Billion by the end of 2032.
The Automated Storage and Retrieval System (ASRS) Market size is
projected to reach a CAGR of 79% from 2022 to 2028. Automated storage & retrieval
systems are inventory management systems commonly used in manufacturing centers,
distribution facilities, and warehouses.
With a projected increase of over 16% in 2024, warehouse automation is
swiftly evolving from an option to a vital necessity for maintaining competitiveness in
todays business landscape. Innovations in areas such as Automated Storage and Retrieval
Systems (AS/RS) are pivotal to the future of warehousing.
B. OPPORTUNITIES AND THREATS Opportunities
• Growing use of aluminium for light weighting, driven by EVs and
stringent emission norms.
• Storage solution industry, especially in the area of ASRS where
the Company emerging strong player offers strong growth potential.
• The growing presence of global automobile Original Equipment
Manufacturers (OEMs) in the Indian auto components industry has significantly increased
the localization of their components in the country.
• Initiatives by Government for promotion of automobile industry -
Automotive Mission Plan 2026, Vehicle scrappage policy, CAFE norms, BS- VI norms, etc.
• Capex increase in the warehouse industry offer good potential
for the storage segment.
Threats
• Highly competitive environment in the conventional storage
segment may lead to margin pressure.
• Lower value-add in aluminium segment in EVs.
• Economic uncertainty: Based on the current and future market
environment estimates, the base cost of material is expected to be volatile.
C. OUTLOOK
A relentless focus on cost management, fiscal prudence, value
engineering and customer partnering has enabled the Company to record a creditable
performance demonstrating its Engineering Advantage.
The Company is confident that it can utilise future opportunities and
face future challenges with agility in order to meet the shareholders expectation of
sustainable growth and profitability. The key focus areas are:
• Debt reduction and thereby savi ngs i n interest cost.
• Increasing the Value Addition per product
• To Sustain the EBITDA margins
• Retaining the existing Customer base and wallet share
• New Products/ Services from Existing Customer
• Enhance profitability in Aluminium and Storage Business
• Enhance the share of non-automotive business
• Diversification to broaden the base.
D. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
PERFORMANCE
The Highlights of the Companys performance is provided below:
• Turnover grown by 8 % and stands at C3,20,779 Lakhs.
• PBT for the year stands at C26,550 Lakhs
• PAT for the year stands at C19,759 Lakhs
• EBITDA for the year stands at C65,617 Lakhs
E. THE DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS
| Particulars |
Unit |
FY 2023-24 |
FY 2022-23 |
% Change |
| Debtors Turnover |
Times |
8.30 |
8.99 |
(8%) |
| Inventory Turnover |
Times |
4.28 |
4.65 |
(8%) |
| Interest Coverage Ratio* |
Times |
4.24 |
5.74 |
(26%) |
| Current Ratio |
Times |
1.03 |
1.15 |
(10%) |
| Debt Equity Ratio* |
Times |
0.91 |
0.72 |
26% |
| Operating Profit Margin (%) |
% |
13% |
15% |
(13%) |
| Net Profit Margin (%) |
% |
6% |
8% |
(23%) |
| Return on Net Worth |
% |
13 % |
17% |
(24%) |
| Ratios |
Reason for changes |
| Interest Coverage Ratio |
Increase in interest cost
(from C117 Crores to C155 Crores) |
| Debt equity ratio |
Increase in borrowings. |
F. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
|
FY 2023-24 |
FY 2022-23 |
| Segment |
Sales |
EBIT |
Sales |
EBIT |
|
D Crores |
% |
D Crores |
% |
| Automotive Powertrain |
1,558 |
19% |
1,527 |
25% |
| Aluminium Products |
917 |
14% |
741 |
9% |
| Industrial & Engineering |
732 |
6% |
713 |
9% |
Automotive Powertrain segment
• Craftsman is one of the leading players involved in the
machining of critical engine and transmission components for M&HCV and tractors. The
Company also serves off-highway & PV OEMs.
• Considering the potential in the off-highway components the
Company focus on strengthening the presence in the space by creating facility and invest
in the capabilities.
Aluminium Products segment
• Aluminum usage in expected to increase, driven by the structural
trend of light weighting due to stringent emission norms. While India is lagging developed
markets, faster adoption of emission norms and technology will drive increasing usage of
aluminum in the Indian auto industry.
• Aluminum product segment has broadened wider with inclusion of
DR Axion thereby on the consolidated basis it gives impetus to overall growth.
Industrial & Engineering segment
• The industrial & engineering segment is a well- diversified
business segment. The major portion of revenue comes from high end products and
subassemblies for contract manufacturing and Storage solution business.
• Despite being a late entrant in the storage solution business,
the Company is one of the leading players in conventional storage and one of the prominent
players in the nascent automated storage. In addition to strengthening its presence in
e-commerce segment, we have secured business from other sectors such as pharma, auto, and
cold storage, thereby helping to expand our addressable market.
G. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company maintains adequate and effective internal control systems
commensurate with its size and complexity. It also ensures that they are recorded in all
material respects to permit preparation of financial statements in conformity with
established accounting principles, along with the assets of the Company being adequately
safeguarded against significant misuse or loss.
In the opinion of the Management, the Company has adequate internal
audit and control systems to ensure that all transactions are authorized, recorded and
reported correctly. An independent internal audit function is an important element of the
Companys internal control systems. This is supplemented through an extensive internal
audit programme and periodic review by the management and the Audit Committee. The
internal control systems comprise extensive internal and statutory audits. The Corporate
Governance practices instituted by the Company are discussed in detail in the chapter on
Corporate Governance which forms part of the Annual Report.
H. RISKS AND CONCERNS
The Risk Management Committee maintains an active oversight of the risk
and the effectiveness of the risk mitigation strategies and plans put in place by the
Company.
Identified key risks of the Company includes Strategic Risk,
Operational Risk, Environment, Safety and Governance (ESG) Risk and Information &
Cyber Security Risk.
The Company has a robust risk mitigation plan to minimize identified
risks through continuous monitoring and mitigating actions as may be required.
I. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS
FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED
Human Resource development continues to be our Top Focused area. The
emphasis was on reskilling and upskilling to enable the teams in navigating change and
remaining compliant with evolving processes. Industrial Relations with employees remained
cordial throughout the year under review.
As on 31st March, 2024 the Company has employed 2500
permanent Employees and workmen.
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