Force Motors Ltd Management Discussions

The nature of technology usage in the Automobile Industry has become unprecedently complicated today. While electrification push continues, the success rate for electrification in different segments varies a lot. Several global manufacturers, having developed electric drive options, and ‘born electric vehicles, have in some segments, even stepped away from further development of electric vehicles, and are re-focusing on improving their ICE technology drivelines and vehicles.

There is a strong regulatory push by the Government of India to introduce organic fuels, besides pushing for electric vehicles. This leads to the need for your Company as well to focus on development of drivelines which are diesel, CNG and electric.

The demand for electric vehicles is comparatively higher in the case of 2-wheelers, and even in the case of passenger cars. Commercial vehicles, particularly the passenger vans do not run on pre-determined routes. In many cases and segments, like school buses and ambulances, the area of operation is small and mileages logged are low. In such cases, electrification is not found to be attractive by the market. The economic advantage of an electric vehicles rises exponentially with mileage logged. The more the vehicles run, the more advantageous it is. Also, if such vehicles run on pre-determined routes, then charging arrangements, etc. are more feasible. While your Company has created EV options for our van segment vehicles, the commercial products has not been strongly taken up as the market is yet evolving.

In the meanwhile, ICE drivelines and use of organic fuels continues to remain an important focus area. Hydrogen electric vehicles or hydrogen combustion vehicles for which the technology has progressed, but these are as yet, realistically speaking, still over the horizon.

Clearly, while electrification is supported by regulation, and organic fuels are promoted by the Government, the transition is neither rapid nor consistent. However, it must be stated that all logic indicates that both electric vehicles, and much enhanced usage of organic fuels, will happen in not too distant a future.

While there is a lot of talk and belief about India becoming a Product Nation and becoming a major exporter, as also attracting lot of FDI - all of which are certainly very desirable and even essential, the fact remains that, at the operating level the introduction and industrialization for new products, creation of new facilities - issues such as land acquisition, the need to negotiate a plethora of laws, and one can say even an obtuse attitude on the part of the Authorities in regard to the plethora of rules and regulations, remains a significant damper.

While the attention of the Government as also the industry is very rightly focusing on evolution of ‘product manufacturing, development, and capability, in India - and the corporate and governmental push in this direction is very laudable indeed - yet at the operating level, particularly laws under the jurisdiction of the States, or on joint list, urgently require simplification taking into account logical economic requirements of business and industry. This reform of land laws, of judicial system overhaul and such, has unfortunately not happened as effectively, or speedily, as is essential.

Your Company has been, over the last more than four decades, grappling with the Government in legal cases - which may have moderate economic impact, but do have relevant social impact particularly in favour of the employees. These litigations against the Government, are the result of the above complexities which have little material basis and much to do with red tape.

Taxation levels on Vans, for reasons best known to the decision makers that be in the authorities, remain extremely adverse, particularly for Vans in the 10 to 13 seats capacity. This is an anomaly which refuses to go away.

The Indian Automotive Industrys global competitiveness can hugely improve if the overall taxation level on passenger vehicles is reduced. The earnings of the industry are only 20 per cent of the earnings of the Government from the same product. On the sale of a vehicle, for every 20 rupees that the industry earns, the Government extracts approximately 50 rupees from the automobile, by way of applied taxes. This must be the highest taxation skew applied to the Automobile Industry anywhere.

The Automobile Industry in India is now very much mature, has scale, experience, competence and drive. The global footprint of vehicles made in India can be rapidly improved to impressive levels, provided the taxation levels are brought within control and the industry is enabled to plough back the profits. Schemes like "Investment Allowance", etc. need to be looked at again, to build up the capital base, and fiduciary strength of companies.

Operational Performance: The number of vehicles sold during the Financial Year under report was 32,068 compared to 32,991 vehicles sold in the previous Financial Year. During the year under report, the Company achieved a top line of Rs.8,07,123 lacs as compared to Rs.6,99,165 lacs for the previous financial year. The sales turnover stood at Rs.8,00,692 lacs compared to the previous years turnover of Rs.6,93,229 lacs.

Financial Performance: As stated above, the Company sold 32,068 vehicles during the Financial Year 2024-25 compared to 32,991 vehicles in the previous Financial Year 2023-24. The Profit before Depreciation, Exceptional Items and Taxes, from operations for the year under report was Rs.1,12,291 lacs as compared to Rs.88,518 lacs for the previous financial year. The Net Profit after Depreciation, Exceptional Items and Taxes was Rs.79,997 lacs for the current financial year as compared to Rs.40,169 lacs for the previous financial year. The Reserves and Surplus of the Company for the current financial year stood at Rs.3,04,894 lacs as compared to Rs.2,27,826 lacs for the previous financial year.

Key Financial Ratios: In accordance with the LODR Regulations, the following are the key financial ratios along with the explanation where changes are more than 25%, as compared to previous financial year.

Outlook on the business of the Company is covered in the Boards Report.

The Company is a subsidiary of Jaya Hind Industries Private Limited, which holds 57.38% stake in the Company.

The Company is a Holding Company of Tempo Finance (West) Private Limited, and holds 66.43%) stake in that subsidiary company.

The Company has a joint venture with Rolls Royce Solutions GmbH, a Company of the Rolls Royce Group. The Company holds 51% stake in Force MTU Power Systems Private Limited (FMTU) by virtue of which FMTU has become a subsidiary of the Company.

The opportunity in India for successfully enlarging the Tour and Travel Hospitality Sector is a very substantial possibility to achieve high economic gains. The improving roadway infrastructure in India, the focus on connecting attractive pilgrimage centers, and tourist sites to the large and efficient grid of express ways and highways, will yield impressive results in the future. This is a special opportunity, given the emerging enhanced stature of India, as the country to travel to.

There is still a tendency to restrict Diesel vehicles in a number of inner cities even though they meet the mandated stringent regulations which are equal to internationally the best regulation. This is a damper on the image and sale of diesel passenger vehicles, particularly mass transport vehicles, such as Vans and Buses.

The Companys internal control procedures are adequate to ensure compliance with various policies, practices and statutes in keeping with the organisations pace of growth and increasing complexity of operations.

The Company maintains system of multi-level internal controls which provides reasonable assurance regarding Effectiveness and Efficiency of Operations, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

During the year under review, such controls were tested and no reportable material weaknesses in the design or operation were observed.

The Company has continued its programme for training and skill development in its plants, for employees at various levels, who are provided training both in hard and soft skills. A large number of executives in the Sales & Marketing arm of the Company and in our dealer, network spread all over India, are also provided continuous upgradation, training in selling skills, product familiarisation, customer service aspects-in a well-structured and extensive programme. The Company had 4,640 employees as on March 31, 2025.

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be forward looking statements. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, amongst others, economic conditions affecting demand/supply and price conditions in the markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.

The disclosure in compliance with the Accounting Standard is provided in the Financial Statement as Note No. 36.

Management Discussion and Analysis is provided in the Annual Report. Necessary disclosures relating to the Accounting Treatment as prescribed in the Accounting Standards are provided in the Boards Report and the Financial Statements.